Reports in Chinese newspapers that the world's second biggest economy was ready to use rare earths to strike back in a trade war with the United States hit global financial markets.

"It's that potential escalation and continued focus on a disruptive impact of a ban on rare earth exports which is rattling the markets again this morning," Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen, said earlier

"Into this there's really not much upside to be found with industrial metals, which thrive on growth and demand.

If demand side starts to fade away, then it's difficult to see what would be holding metals up."

Benchmark copper on the London Metal Exchange slid to $5,873.50 a tonne, the lowest since Jan. 4, before paring losses to stand 1.2pc lower at $5,888 by 1400 GMT.

Copper has lost 11pc since touching a 9-month peak at around $6,600 in mid-April. An unsuccessful move on Tuesday to regain the $6,000 level emboldened bearish speculators, traders said.

"The market was looking for a bounce above the key $6,000 level, but the market failed and that means it will now be looking for support around the $5,800 area," Hansen added.

TIN STOCKS: LME three month tin dropped 1.6pc to $18,900 a tonne after touching $18,705, the lowest since Dec. 3, after LME inventories jumped by 55pc in one day.

ZINC DEFICIT: The global zinc market had a deficit of 15,000 tonnes in the first three months of 2019 versus a surplus of 37,000 tonnes in the same period last year, data showed.

ZINC SPREAD: The premium of LME cash zinc over the three-month contract edged back to $155 a tonne on Wednesday after touching 22-year high of $161 the day before, indicating near-term shortages in the LME system.

"The supply side issues (in zinc) I don't think are going to turn around substantially and demand is holding relatively well. Our view has always been that the market will remain relatively tight," said analyst Daniel Hynes of ANZ.

LEAD DEFICIT: The global lead market deficit narrowed to 7,000 tonnes in the first three months of 2019 from a deficit of 29,000 tonnes in the same period last year, data showed.

The net speculative short position in LME lead is the largest of any metal on the exchange at 25pc of open interest, according to estimates by broker Marex Spectron.

PRICES: LME aluminium declined 0.3pc to $1,801 a tonne, zinc dropped 0.9pc to $2,539, lead gave up 0.5pc to $1,816.50 and nickel fell 0.5 percent to $12,050.