Zinc and lead slipped on Friday to their lowest levels in a week as investors prepared for possible shocks in Europe ahead of an Italian referendum and Austrian election. Italian Prime Minister Matteo Renzi has pledged to resign if voters reject constitutional reform. In Austria, meanwhile, presidential candidate Norbert Hofer of the Freedom Party is running on an anti-immigration platform.
"The market is probably positioning for the weekend events," said Xiao Fu, head of commodity market strategy at Bank of China International in London. "A 'no' vote in the referendum in Italy and also the first far-right party winning in Austria would introduce more uncertainty in Europe."
Benchmark zinc on the London Metal Exchange closed down 2.2 percent at $2,668 a tonne while lead shed 1.9 percent to end at $2,270. Zinc and lead, usually found in the same mines, have been two of the biggest LME gainers over the past month as speculators jumped into the market, but they have retreated sharply from multi-year peaks hit last Friday.
Other markets, including global equities and oil, were also weaker on Friday as strong US jobs data increased the likelihood that the Federal Reserve will raise interest rates this month. "With the market also expecting a US rate hike, that means that dollar strength could resurface and base metals could be in danger of giving up some more of their previous gains," Fu added.
Three-month LME copper slipped 0.5 percent to finish at $5,760 a tonne, extending losses from the previous session. Carsten Menke, research analyst at Julius Baer in Switzerland, said he had turned bearish on copper with a price target of $5,200. "We see even more downside after speculative positioning in the futures markets moved to excessively bullish levels," he said in a note. "However, copper does not stand out as a key beneficiary of increased US infrastructure spending."
LME nickel rebounded from earlier losses, closing 2.2 percent firmer at $11,455 after news that the Philippine government will suspend more mines in a fight against environmental degradation. Aluminium fell 0.5 percent to $1,714, unmoved by news that Alcoa shut a potline at its Australian Portland smelter because of a power shortage. Tin dipped 0.1 percent to $21,055.
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