LONDON: Copper prices retreated from a two-month high on Tuesday as worries about the economic damage from the COVID-19 pandemic offset optimism over a potential vaccine.
Financial markets rallied on Monday after positive data in a preliminary safety trial of a new vaccine from US company Moderna.
But investors on Tuesday also had to confront data showing a leap in UK jobless claims to their highest level in 24 years and a forecast that Europe's largest economy, Germany, would shrink by at least 10% this year.
"It's a reality check setting in after yesterday's strong surge," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
"We may have an alternative vaccine, but we're probably 12-18 months from it hitting our medicine cabinets. In the meantime, dreadful economic data is still coming from around the world."
Three-month copper on the London Metal Exchange (LME) was up 0.4% at $5,336.50 a tonne by 1140 GMT, paring gains after touching $5,377.50, its highest since March 16.
Copper, which gained 2.6% on Monday, has rebounded 22% since touching a 45-month low on March 19.
"The $5,350 level is key and remains quite a challenge for LME copper at this stage," Hansen said. "Until we get some more solid news about growth, then the upside seems to be driven more by hope than by reality."
The most-traded copper contract on the Shanghai Futures Exchange closed 1.8% up at 43,690 yuan ($6,148.50) a tonne, having eased from a one-month high of 44,030 yuan earlier in the session.
"Metals have trimmed earlier gains as equities and the yuan are falling back. President Trump is escalating threats towards the WHO (World Health Organization), indirectly increasing tensions with China," said Marex Spectron commodities broker Anna Stablum.
Trade relations between the United States and China have turned sour after Washington expressed disappointment over the way China handled the coronavirus outbreak, raising fears that the countries could escalate their trade conflict and hurt economic growth further.
Prices of metals were also supported by market expectations that China, the world's biggest metals consumer, could announce more stimulus measures at a parliamentary meeting this week.
LME aluminium was unchanged at $1,496 a tonne, zinc fell 0.6% to $2,011.50, lead dipped 0.1% to $1,663.50, nickel firmed by 0.4% to $12,295 and tin was up 0.1% at $15,300.