LONDON Copper rose over 2 percent on Thursday as investors' concerns about Europe's debt crisis eased following a debt auction in Italy and on speculation that Chinese growth data could come in better than expected on Friday.
Benchmark copper on the London Metal Exchange ended at $8,220 a metric tonne (1.1 ton), up from a close of $8,040 on Wednesday, when it fell as low as $8,018, its weakest level since January 16.
The metal used in power and construction has lost some 3 percent so far this month, though it is still up around 7 percent for the year.
Metals traders cited talk that first-quarter GDP data in China, due out on Friday, could beat market forecasts, with some dealing rooms betting on 9 percent, versus a Reuters consensus of 8.3 percent.
China consumes about 40 percent of the world's copper.
Italian three-year borrowing costs jumped by more than one percentage point at a bond auction compared with a month ago, but 10-year yields on both Italian and Spanish bonds edged lower for the day, and the euro strengthened versus the dollar.
"It (Europe's debt crisis) has been a contributory factor in the weakness over the last couple of weeks, but the default position of markets is to be bullish unless the evidence is overwhelmingly the other way around," said BNP Paribas analyst Stephen Briggs.
He added: "Chinese demand is soft by China standards, but it's still growing, and until next year you still have supply constraints in copper and people are very aware of that."
China's bank lending trumped forecasts to rise to 1.01 trillion yuan ($160.1 billion) in March, in a sign of fresh traction in Beijing's efforts to ease monetary policy and boost credit creation to support the cooling economy.
Trader talk of better GDP figures on Friday came in the wake of data on bank lending, which is expected to have helped engineer a soft landing for the world's second-biggest economy.
Also helping copper in particular, car sales in China were up in March from a year earlier and rose 4.5 percent from the same month last year.
Strong car sales by European firms, mainly driven by Chinese demand also boosted sentiment.
"Given the broad-based strength across markets, with equities showing gains and metals rebounding, it does look as though the markets have put aside the recent concerns about data and Spain's debt problems," Fastmarkets said in a research note.
"As such, we would not be surprised to see further strength in the base metals in the short term but would keep a wary eye on developments in EU debt. On balance, we still feel the base metals will work lower over the medium term."
The World Bank has lowered its forecast for China's 2012 economic growth to 8.2 percent from 8.4 percent previously, reinforcing the view that China is set for its slowest annual growth in a decade.
Slower growth in China however, would not necessarily be negative, analysts say, as it makes monetary easing more likely.
Nonetheless, weaker copper demand and raising inventories in China remain one of the main concerns for investors.
Inventories of copper in warehouses monitored by the Shanghai futures Exchange have quadrupled since the beginning of the year, which might suggest sluggish consumption.
Tin ended at $22,655 a tonne from $22,425 at the close on Wednesday while nickel closed at up over 3 percent at $18,800 from a last bid of $18,100 on Wednesday. .
Indonesia, the world's top exporter of thermal coal and refined tin and a large nickel producer, should quickly impose a tax on mining exports, the industry minister said on Thursday in comments likely to worry miners.
A trader said nickel's sharp gains were aided by short covering by black box funds or CTAs, with Indonesia's mooted mining tax also helping in part by prompting Macquarie and BNP Paribas to review their ideas about the metal's price prospects.
Zinc, used in galvanizing, ended at $2,040 a tonne from $1,995.
Battery material lead closed at $2,098 from $2,053 and aluminum at $2,104 from $2,099.
(Editing by Jane Baird)