Market and product

May 5 London copper sank to fresh two-week lows on Thursday, as a stronger dollar prompted commodity markets to take a breather after April's broad-based rally, while a deteriorating technical picture pointed to further consolidation.

Chinese data showing factory activity in the world's top metals consumer shrank for a 14th consecutive month has muddied the outlook for metals demand and dulled hopes of economic revival after a credit-fuelled rally.

Data due in coming weeks is expected to show China's economic activity moderated in April after a strong showing in March, adding to questions over whether the world's second-largest economy is recovering, a Reuters' poll of economists showed.

"You take all these bits and pieces from China ... that oil has gone too far and has a reversal in the making, and you have all these things lined up for commodities to fall again," said Dominic Schnider of UBS Wealth Management in Hong Kong.

Defaults are still rising in China, raising the prospect of a liquidity crunch, or at least that the credit-fuelled rally that fuelled soaring commodity prices this year may wind back, he added.

"On copper, I think we're going to test $4,630 as the next stop, although we may see this year's lows remain in place."

Three-month copper on the London Metal Exchange slipped 0.9 percent to $4,822 a tonne by 0707 GMT, after losing 1.1 percent in the previous session when they closed below the 200-day moving average, suggesting more technical selling may ensue. Prices gained 4.1 percent last month.

Shanghai Futures Exchange copper slid 1.4 percent to 36,840 yuan ($5,667) a tonne.

Signalling a shortage in nearby physical stocks of metal, copper for delivery Friday flared out to an $8.50 premium against delivery for Monday, which has offered support to benchmark prices.

Chinese steel and iron ore futures fell for a third straight day, giving up more froth after Chinese exchanges slapped curbs to quell speculation that spurred a buying frenzy last month.

"Ferrous are getting sold, that's putting pressure on nickel," one trader in Singapore said.

LME and Shanghai nickel fell around 2 percent. Prices of nickel, used in stainless steel, surged as much as 17 percent since early April as investors jumped in after China's stainless mills ramped output last month.

Helping buoy the dollar, the U.S. services sector expanded in April as new orders and employment accelerated, bolstering views that economic growth would rebound.

In news, the incoming chief executive of global miner Rio Tinto said the company expects a tough macro operating environment for the foreseeable future.