Copper rose on Friday after better-than-forecast labour market data from the United States raised optimism about the economic health of the world's largest economy, but gains were capped by a strong dollar. Benchmark copper on the London Metals Exchange ended at $7,580 a tonne, up 0.5 percent from a close of $7,540 on Thursday.
US employment grew solidly last month, and the jobless rate dropped to a near three-year low of 8.5 percent, offering the strongest evidence yet of an acceleration in economic activity. Optimism about an upturn in the US labour market has been running high in recent days after data on Thursday showed a rise in private sector hiring and a drop in weekly jobless claims.
"We could see the base metals complex move higher over the course of the day, because this is the kind of good macroeconomic news you need. I don't think we are going to be pushing much lower from here," said Edward Meir, an analyst at INTL FCStone. The encouraging data helped push the dollar index to a fresh one-year high, with the euro dropping to a near 16-month low against the dollar, in a move that capped gains for metals priced in the US currency.
"This is a positive dollar strength story (today) because ... when the dollar strengthens on a relief like this, it is not going to impact metals very negatively," Meir said. Also keeping a lid on prices was persistent concern about the eurozone debt crisis as the region risks heading into a recession.
Increasing sovereign debt default risk and funding stress in the eurozone and economic slowdown in metals top consumer China were the main factors to push copper prices down by 21 percent last year. Raising yields on Spanish and Italian government bonds on Friday signalled concerns were still strong about the capability of these EU countries to honour their debt and that funding stress in the banking sector was also still at a high level.
News that commercial banks still preferred to deposit funds at the European Central Bank rather than receive higher rates from lending to each other was also weighing on market sentiment and on prices of assets deemed as riskier, such as metals. Fundamentals for copper, however, remained positive and supply tightness was highlighted by news that workers at Freeport McMoRan Copper and Gold Inc's mine in Indonesia will stop returning to work on Saturday if they are not paid salaries owed to them during a recent three-month strike.
Among other metals, aluminium ended at $2,069 a tonne from Thursday's close of $2,036, supported by news of production cuts. Alcoa Inc, the largest US producer of aluminum, said it will slash its global smelting capacity by 12 percent, becoming the first producer to take direct action to cut costs amid a steep drop in metal prices.
"With spot aluminium at $0.91/lb we estimate about 30 percent of global primary smelting capacity is loss making, therefore additional industry smelter closures look likely," said Liberum Capital in a research note. Tin closed at $19,850 a tonne from $19,805 while zinc ended at $1,853 from $1,833. Battery material lead was at $1,959 from $2,005 while nickel was at $18,800 from $18,650.