Copper hit a seven-month high of $9,550.50 a tonne in January as speculators bet that China's economy would revive and U.S. interest rates would stop rising, removing a brake on economic growth and allowing the dollar to weaken.
But strong U.S. employment data last week triggered fears of higher interest rates and boosted the dollar, which rose further on Friday, making metals costlier for non-dollar buyers. Chinese metals inventory numbers and factory gate price data on Friday underlined continued weakness in the country, where stock markets and the yuan fell, despite a rise in new bank loans in January. Global equities fell. Benchmark LME copper on the London Metal Exchange (LME) was down 1.5% to $8,851 a tonne by 1726 GMT and was also around 1.5% lower for the week.
Prices of the metal used in electrical wiring are still up more than 15% from the start of November.
"The market jumped the gun," said Saxo Bank analyst Ole Hansen.
Chinese demand may not revive until the second quarter, raising the risk of a short-term price decline, he said, adding that he was bullish in the longer term.
The Lunar New Year is typically a period of weak demand in China and copper inventories in Shanghai exchange warehouses tend to rise sharply, peaking around March.
This year's increase to 242,009 tonnes from 54,569 tonnes in late December is already the biggest since 2020. However, copper stocks in Chinese bonded warehouses, at 129,300 tonnes, are far below typical levels and inventories in LME warehouses, at 63,100 tonnes, are the lowest since 2005, providing little buffer if demand rises. In other metals, LME aluminium fell 1.8% to $2,448 a tonne, zinc was down 3% at $3,030.50, nickel tumbled 4.8% to $27,735, lead slipped 1.9% to $2,085 and tin was down 1.2% at $27,410. (Reporting by Peter Hobson; Additional reporting by Siyi Liu and Dominique Patton; Editing by David Goodman and Paul Simao)
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