May 19, 2020 / 1:26 PM / 16 days ago

METALS-Copper pulls back from two-month high on economic worries

* LME copper hits highest since March 19

* Copper fails to break through key $5,350 level -analyst (Updates with official prices)

By Eric Onstad

LONDON, May 19 (Reuters) - Copper prices retreated from a two-month high on Tuesday as worries about the economic damage from the COVID-19 pandemic offset optimism over a potential vaccine.

Financial markets rallied on Monday after positive data in a preliminary safety trial of a new vaccine from U.S. company Moderna.

But investors on Tuesday also had to confront data showing a leap in UK jobless claims to their highest level in 24 years and a forecast that Europe’s largest economy, Germany, would shrink by at least 10% this year.

“It’s a reality check setting in after yesterday’s strong surge,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

“We may have an alternative vaccine, but we’re probably 12-18 months from it hitting our medicine cabinets. In the meantime, dreadful economic data is still coming from around the world.”

Three-month copper on the London Metal Exchange (LME) rose 0.5% to $5,343.50 a tonne in official trading, paring gains after touching $5,377.50, its highest since March 16.

Copper, which gained 2.6% on Monday, has rebounded 22% since touching a 45-month low on March 19.

“The $5,350 level is key and remains quite a challenge for LME copper at this stage,” Hansen said. “Until we get some more solid news about growth, then the upside seems to be driven more by hope than by reality.”

Also crimping metals prices was rising tension between the United States and top metals consumer China.

U.S. President Donald Trump threatened on Monday to permanently halt funding for the World Health Organization after accusing it of promoting Chinese “disinformation” about the coronavirus outbreak.

* CHINA STIMULUS: Prices of metals were supported by market expectations that China, the world’s biggest metals consumer, could announce more stimulus measures at a parliamentary meeting this week.

* PRICES: LME aluminium added 0.1% to $1,498 a tonne in official activity, zinc fell 0.4% to $2,016.50, lead slipped 0.5% to $1,655.50, nickel firmed by 0.8% to $12,349 and tin was down 0.4% at $15,225.

* For the top stories in metals and other news, click or ($1 = 7.1058 yuan) (Additional reporting by Mai Nguyen in Singapore Editing by David Goodman)

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