(Updates with closing prices)By Peter HobsonLONDON, Oct 11 (Reuters) - Industrial metals prices fell onThursday, caught by a global stock market sell-off, with leadhitting its lowest in more than two years, but the market hadmostly recovered by the close of trading.
Benchmark LME lead sank to its lowest sinceSeptember 2016 at $1,876 but ended the session 4.7 percenthigher at $1,999 per tonne. Aluminium touched a two weeklow, ending 1.3 percent down at $2,020.A global measure of equity prices fell to a one-year low onThursday as investors feared an escalating U.S. trade war withChina and risks from a recent climb in interest rates. This has overpowered positive supply and demand signals formetals, Deutsche Bank analyst Nick Snowdon said.
The U.S.-China trade dispute has reduced demand for riskierassets and helped push the London Metal Exchange (LME) index ofindustrial metals down 15 percent since June. "There's a divergence between very supportive near-termmicro fundamental trends (for metals) and much greateruncertainty at the macro level," Snowdon said.
LEAD: Lead has fallen some 7 percent since Oct. 2 and isdown nearly 30 percent from a high in February.
TECHNICALS/FUNDS: A break below technical levels, includingits August low, had triggered selling and intensified pressurefrom financial investors betting on lower prices, a trader inLondon said.
STOCKS: Supporting prices are stock drawdowns. Inventoriesin LME warehouses at 116,375 tonnes are down around 20 percentthis year and near 9-year lows. Stocks in Shanghai FuturesExchange warehouses have slipped more than 70 percent this yearto just over 11,000 tonnes.SUPPLY: The global refined lead market will, however, flipto a surplus of 50,000 tonnes next year after a deficit of123,000 tonnes in 2018, the International Lead and Zinc StudyGroup (ILZSG) said this week. OUTLOOK: Lead is likely to hold up, consultants WoodMackenzie said in a note. "Refined supply will still exceeddemand to 2021, but not to the extent that prices tanksubstantially," analyst Giles Lloyd wrote.
COPPER: LME copper was barely changed at $6,242 atonne after touching its weakest since Sept. 20. It was holdingabove its technically important 50-day moving average at $6,098.SPREAD/STOCKS: In two signals of a tight market, cash copperhas flipped from a discount to a premium of $11.75 over thethree month contract and stocks in LME warehouses fell furtherto 170,100 tonnes, the lowest since mid-2016.OTHER METALS: Zinc traded 0.8 percent lower at$2,606, nickel ended a touch lower at $12,675 aftertouching a one-week low and tin ended 1.3 percent higherat $19,275.<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Top base and precious metals analysis - GFMS ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Tom Daly; Editing by Kirsten Donovanand Alexander Smith)