LONDON Copper edged higher on Thursday, helped by a stronger euro on expectations Spain would seek a bailout to rescue its economy, although gains were capped by uncertainty about global growth, while trading volumes were low as China remained on holiday.
Benchmark copper on the London Metal Exchange (LME) rose 0.2 percent to finish at $8,305, from Wednesday's close of $8,290.
In the last few weeks central banks in the United States, European Union and Japan have moved to loosen their monetary policy, in an attempt to stimulate economic growth.
This boosted prices of commodities deemed riskier, including industrial metals.
"A lot of the actions from central banks recently have clearly helped to minimize any downside risks and they have tended to also weaken the dollar," Standard Chartered analyst Daniel Smith said.
"Copper is slightly underperforming (other metals) as the fundamentals are not that good at the moment with demand especially in Europe still pretty terrible. In the medium term though we think fundamentals will turn around."
The euro rose against the dollar, with investors keeping a close eye on possible financial aid for Spain as the European Central Bank (ECB) left interest rates unchanged at its latest meeting.
"Investors are still waiting for Spain to bite the bullet and request a formal rescue. It is a not a question of if but when for Spain (to ask for a bailout) and that will be seen as a huge relief for the market," said Robin Bhar, analyst at Societe Generale.
"But the potential upside for copper is pretty limited whist there is uncertainty about China's growth and U.S. growth and with the euro zone in recession, and that is going to keep a lid on rallies."
Trading volumes were thin as China is still on a public holiday. China is the world's top consumer for refined copper, accounting for as much as 40 percent of demand.
Investors are likely to look ahead to nonfarm payrolls data from the United States, due on Friday, for indications of a recovery in the country's labor market.
Sentiment surrounding the U.S. labor market was boosted in the previous session after data showed private sector hiring rose by a better-than-expected number in September.
Activity in the vast services sector also picked up, suggesting the economy remained on track for modest growth.
"We think the slant of the market after the payroll numbers on Friday will really be the action one should pay attention to. For now look at continued back and forth as the market consolidates terrific gains made since August," RBC Capital said in a note.
A report on Thursday showed that the number of Americans filing new claims for unemployment benefits rose only slightly last week after a big drop the week before, keeping in place a trend that suggested a mild improvement in the labor market.
In industry news, Japan's biggest copper smelter, Pan Pacific Copper (5020.T), is in talks with buyers in China to slash its term premium for 2013 shipments by 15 percent from this year to $85 a metric tonne, a source familiar with the matter said.
The lower premiums reflect slowing demand growth in the world's top consumer of metals.
Uncertainty about the outlook for physical demand continues to sour sentiment for the metal used in power and construction as global economic growth struggles.
"Overall we expect Q4 prices to continue to take cues from the macro rather than the physical market," said James Luke, a Hong Kong-based commodities analyst at China International Capital Corporation (CICC).
"Prices will be well supported but I don't expect physical demand to surprise on the upside and that should limit prices relative to other more purely investor-driven metals such as gold."
In other metals, battery material lead closed at $2,290.50 a tonne, from Wednesday's close of $2,306, while zinc ended at $2,065 from $2,082 at the close on Wednesday. Nickel closed at $18,675 from $18,525.
Aluminium finished at $2,212 per tonne, from a last bid of $2,102.50 on Wednesday, and tin at $22,500, its highest since early May, from a last bid of $22,100.
(Additional reporting by Melanie Burton in Singapore; Editing by Pravin Char)