LONDON, Oct 29 - Copper clawed up from one week lows on Thursday with prices garnering support from a weaker dollar, but gains were restrained as fragile equity market sentiment fanned concern on the strength of economic reovery.
By 1033 GMT, copper for three month delivery on the London Metal Exchange traded at $6,450 a tonne from $6,430 at the close on Wednesday. The metal, used in power and construction, earlier hit a one week low at $6,405.
"The dollar/euro rate is the leader for copper prices," said John Meyer, an analyst at investment bank Fairfax. "There is so much liquidity out there that I don't see an overall collapse in the market place."
"The bigger investors may remain sidelined but I think its going to be a traders' market until equities settle down again."
On Wednesday, many industrial metals hit multi-week lows, as weak housing data and a stronger dollar drove prices lower.
Adding pressure on base metals, equity markets have fallen in recent sessions, as investors worry about the outlook for global economic recovery after months of gains. "Equity markets are determining short-term trading direction," said Meyer. "It introduces cautiousness into the market, with copper at high price levels it is easy for traders to give it some negative direction."
Currencies have also played a major role is rising commodity prices this year, with a weaker U.S. unit making metals priced in dollars less expensive for holders of other currencies.
But some analysts say base metal prices have run ahead of weak fundamentals, with greater prominence given to macro data.
"A persistent theme throughout markets has been the sustainability of the trajectory of recovery," said Barclays Wealth in a note.
"Today's packed calendar of economic news will assist both economists and direct financial market participants to derive some more clarity."
Looking ahead, the U.S. GDP figures from 1230 GMT could give further direction. Economists surveyed by Reuters expect a 3.3 percent annualized pace of growth.
On Wednesday, Goldman Sachs cut its forecast for third-quarter U.S. gross domestic product growth to 2.7 percent from 3.0 percent.
INVENTORIES SLIP
Aiding sentiment, LME copper inventories bucked the recent trend by falling slightly, although worries over demand outside China remained. Inventories of copper at LME warehouses shed 325 tonnes to remain near five month highs at 371,400 tonnes.
Aluminium was flat at $1,912. LME stocks for the metal, used in transport and packaging, lost 5,450 tonnes to 4.56 million tonnes.
Also supporting prices, Japanese industrial output rose for the seventh month running in September, as global stimulus measures led car and electronics makers to increase production. Nippon Steel Corp, the world's No.2 steelmaker, booked a third consecutive quarterly loss but raised its full-year outlook amid a recovery in exports to Asia and demand from the auto industry.
Steel making ingredient nickel traded at $17,970 from $17,800 while battery material lead was at $2,263 from $2,231.
On the supply side, PT Timah Tbk, the world's largest integrated tin miner, reported a sharp drop in third-quarter net profit.
Zinc traded at $2,191.50 a tonne from $2,190 and tin edged up to $14,750 from $14,650.
Metal Prices at 1037 GMT Metal Last Change Percent Move End 2008 Ytd Percent
