LONDON: Copper surged nearly 7 percent on Monday to its highest in nearly one month as encouraging manufacturing data from top metals consumer China and hopes for a euro zone debt deal boosted investor confidence.
Benchmark copper nickel and tin all rallied more than six percent with other contracts also seeing strong gains.
Copper on the London Metal Exchange (LME) closed at $7,635 a tonne, up 6.9 percent from $7,145 per tonne on Friday.
The metal used in power and construction has rallied more than 12 percent in the last two days, but still remains around a quarter below its record high of $10,190 a tonne reached in February.
"It's all down to the equity rebound and the weaker dollar," said VTB Capital analyst Andrey Kryuchenkov.
"We're trading on headlines at the moment. If what happens in the euro zone is not too disappointing we'll start trading more fundamentally," he added.
Global stocks hit a seven-week high on Monday and oil prices rose on optimism that European leaders were moving closer to resolving the debt crisis and after Chinese data eased fears of an abrupt slowdown in the world's second-largest economy.
Also helping revive risk sentiment were positive US earnings from companies including Caterpillar , which far exceeded analyst expectations on Monday, reporting a 44 percent quarterly earnings increase due to record revenue. The company signaled tempered optimism in its 2012 outlook.
A stronger euro lent support, although it eased from six-week highs against the dollar.
A weaker US currency makes dollar-priced commodities more affordable for holders of other currencies.
"Metals have sold off in recent months on EU debt fears, but now expect some constructive outcome from Wednesday's EU summit and seem to be anticipating that by buying ahead of it," said FastMarkets in a research note.
"We fear (EU lawmakers) may end up just buying more time and the market might not be satisfied with that for long...we feel rallies will continue to be sold into, but there may be more room on the upside in the short term."
ROBUST DEMAND
Encouraging manufacturing data from China soothed investor fears that an abrupt slowdown in the world's second largest economy might seriously affect base metals demand prospects.
China's vast manufacturing sector expanded moderately in October to snap three months of contraction, reflecting the resilience of robust domestic demand, although the data still reflected slower growth due to tighter credit conditions.
"China's PMI rose... which diminishes the risk of China having a hard landing," Credit Agricole analyst Robin Bahr said.
China is the world's biggest copper consumer, accounting for around 40 percent of the global refined copper demand last year.
Also boosting investor confidence, euro zone industrial new orders rose more than expected in August from the previous month, according to data released by the EU's Statistics Office.
Many think this metals price rally may be short-lived as market sentiment has been very volatile lately and Europe's debt crisis has not been averted yet.
"The outcome of industrial metals is in our view binary," Credit Suisse said in a research note.
"A credible package to address debt problems would be positive. A disappointing solution could lead to a break of the trend lines to the downside. In any case, we think that it is currently too early to buy into the sector."
Tin finished at $22,500 from $21,670 while zinc , used to galvanize steel, closed up almost 4 percent at $1,876 from $1,805 at Friday's close.
Battery material lead finished up 5.4 percent at $2,019 from $1,915 while three-month aluminium was untraded in kerb trading but bid at $2,218 from $2,125.
Nickel jumped more than six percent to end at $19,995 from $18,800, fuelled in part by short-covering, a trader said.
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