Copper prices in London gained as much as 8 percent on Friday and Shanghai futures closed at their upside limit as speculative investors poured back into the market after a tiny glimmer of positive U.S. jobs data.
Traders said the surge, which developed in very brisk futures trading, was probably the result of speculative activity following positive U.S. employment data overnight.
But markets are still braced for a big drop in Friday's non-farm payrolls for December, which could surpass expectations of a 500,000 decline, even though the number of U.S. workers filing new claims for unemployment benefits fell unexpectedly by 24,000 last week, data showed on Thursday.
Speculative buying, maybe some short covering after the U.S. data, is probably behind the rally, a metals broker in Hong Kong said.
But people are selling into the strength and I think we will hold around this $3,400 level in Asia, before selling down again in Europe.
Benchmark third month Shanghai copper SCFc3 rose by its 5 percent limit from Thursday's settlement to 27,280 yuan, while three-month London Metal Exchange copper MCU3 gained 8 percent to peak at $3,449.75 in electronic dealing.
But China's physical buyers refused to follow and LME prices were back at $3,370 by 0702 GMT, though still up 5.5 percent on the day.
Industrial raw materials are at very low levels and it doesn't take much to trigger reactionary buying, said Barclays Capital analyst Yingxi Yu.
But to me, this signifies a short-term rebound and not the bottoming out of the market. The underlying fundamental conditions probably haven't improved.
Sentimemt also got a lift after President-elect Barack Obama, who takes office on Jan. 20, has urged U.S. lawmakers to work day and night to pass a massive proposed stimulus package of tax cuts and public-works spending likely to cost $800 billion or more.
The LME (gains) could be an extension of the recent rise after a correction on Thursday. But spot trade in China was thin, said Liang Zhigang, analyst at StarFutures in Shenzhen.
Shanghai zinc SZNc3 rose 165 yuan to 10,745 yuan a tonne after hitting its downside limit on Thursday. London futures MZN3 rose $25 to $1,260 or 2 percent.
Other commodities also gained ground, with oil above $42 a barrel amid mounting signs that top crude exporter Saudi Arabia will deepen its supply cuts in February to at least three Asian crude buyers, industry sources said on Friday, signalling it is cutting output more to support prices.
(Reporting by Nick Trevethan; Editing by Clarence Fernandez)