Copper edges higher after Chinese data, downside risks remain

• The PMIs in China have been oscillating between expansion and contraction for the last couple of months.
• "The indicators are still on the softer side and there's a lot of continued uncertainty."
• Three-month copper on the LME was up 0.3% at $5,815 a tonne by 1000 GMT, recovering from a 1.9% drop in the previous session.

LONDON: Copper prices clawed higher on Friday after upbeat Chinese manufacturing data, but uncertainty about global growth and trade tensions will likely weigh on the market, analysts said.

China's factory activity unexpectedly expanded at the fastest pace in well over two years in October, as new export orders rose and plants ramped up production, a private business survey showed.

The results stand in contrast with an official survey published on Thursday, which showed China's factory activity shrank for the sixth straight month in October.

"The PMIs in China have been oscillating between expansion and contraction for the last couple of months," said Geordie Wilkes, head of research at Sucden Financial, referring to purchasing managers data.

"Even though we had that data from China, there was quite a lot of negative news yesterday .. We're still in the camp that sees prices edging lower and I think we'll probably push back to $5,700 in the near term," Wilkes added.

"The indicators are still on the softer side and there's a lot of continued uncertainty."

While US President Donald Trump said on Thursday the United States and China would soon announce a new site where he and Chinese President Xi Jinping will sign a "Phase One" trade deal, China's Foreign Ministry on Friday dismissed as speculation talk the two leaders will meet in Macau.

Three-month copper on the London Metal Exchange (LME) was up 0.3% at $5,815 a tonne by 1000 GMT, recovering from a 1.9% drop in the previous session, which was the biggest fall in almost three months due to the weak China data on Thursday. It is still heading for a weekly drop.

ZINC STOCKS: LME on-warrant zinc stocks hit a record low of 27,800 tonnes while the speculative net long in zinc marked the highest since mid-April, according estimates by broker Marex Spectron.

LME zinc added 0.4% to $2,493 a tonne.

ALUMINIUM SPREAD: The discount of cash LME aluminium to the three-month contract has declined to 75 cents a tonne, the lowest since January and compared with a discount of $33.25 in mid-September. This indicates less availability of inventories in the LME system.

LME aluminium was unchanged at $1,755.

NICKEL: Nickel miner Independence Group NL said it will stop work on developing a downstream nickel sulphate facility.

NICKEL STOCKS: Nickel inventories in warehouses monitored by the LME, which have tumbled 58% over the past seven weeks, touched the lowest since December 2008.

PRICES: LME nickel added 0.8% to $16,780 a tonne, lead rose 0.3% to $2,165, and tin was up 0.3% to $16,570.