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[LONDON] Metal prices hit multi-year lows on Friday after weaker-than-expected data from China and the eurozone raised concerns about global growth, but the US dollar rose as a Federal Reserve rate hike was still on the table.
London copper fell to its lowest level since 2009 after a survey showed China's factory sector contracted by the most in 15 months in July due to shrinking orders, fuelling worries over demand in the top metals consumer as stockpiles steadily mount.
The flash Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) dropped to 48.2, below economists'estimate for a reading of 49.7. It was the fifth straight month below 50, the level which separates contraction from expansion.
Eurozone business activity also started the second half on a less secure footing than expected, hit by Greece's near-bankruptcy woes. Markit's flash PMI fell to 53.7 this month from June's four-year high of 54.2. A Reuters poll had predicted a more modest dip to 54.0.
While economies looked weaker in Europe and Asia, better-than-expected US jobless claims kept the Federal Reserve on track for a rate hike in coming months.
The US dollar was 0.3 per cent higher against a basket of currencies.
"What a conundrum we face: commodities are shouting that the global economy is deteriorating, key emerging markets are already seeing major volatility, and yet the world's most important central bank is close to tightening monetary policy," Michael Every, head of financial market research for Asia at Rabobank.
In a busy day for corporate updates on Friday, BASF , the world's largest chemicals firm by sales, slightly missed expectations with a 2 per cent rise in operating profit, with profits of French food group Danone also falling short of expectations.
The pan-European FTSEurofirst 300 hit a one-week low early in the day , but quickly rebounded to trade 0.2 per cent higher at 1582.67. Euro zone bond yields fell.
"We should keep in mind that the ECB (European Central Bank)has quite optimistic growth assumptions underlying their QE scheme," Commerzbank strategist Michael Leister said. "So if we get a comprehensive set of disappointing data it will increase the expectation that the ECB will have to keep QE longer or increase the monthly size."
The Australian dollar, often used as a liquid proxy for China trades, hit a six-year trough of $0.7295. Slowing Chinese growth means less demand for commodities such as iron ore, one of Australia's chief exports. The recent decline in a wide range of commodities, including oil, has weighed on currencies like the Canadian and Australian dollars.
London and Shanghai nickel contracts both fell 1.2-1.4 per cent.
China looks set to further reduce interest rates and the amount of cash its banks must hold as reserves to try to keep its economy growing at 7 per cent this year, which would be the slowest pace in a quarter of a century, a Reuters poll showed on Thursday.
The euro dipped to US$1.0952 after the European data, still well above last week's 3-month low of US$1.0808.
Gold slid more than 1 per cent to its lowest since early 2010 on Friday, on course for its biggest weekly loss in nine months.
Crude oil futures rebounded from multi-month lows , with US crude up 25 cents at US$48.70 a barrel. Oil prices in the United States have slumped more than 20 per cent in the past six weeks. Brent September crude was up 7 cents at US$55.34 a barrel.