Bareksa.com - Nickel prices climbed on Friday after plunging 11 percent in the previous two days that partly eroded the metal's stellar rally this year, while copper prices eyed their biggest weekly gain in nearly two months on robust demand.

Nickel prices have suffered this week as investors have locked in profits but prices are set to bounce back as long as top exporter Indonesia keeps squeezing supply and stainless steel producers can absorb higher prices.

London Metal Exchange (LME) prices climbed 1.4 percent to $19,050 a tonne on Friday. Nickel was on track to shed 4.5 pct this week, its biggest weekly loss since August 2013 when it slid 5 percent, but is still up 37 percent this year.

Copper prices have been underpinned by tight supply and falling stocks amid the peak season for demand. However, consumption is set slow from next month, dragging on copper's price prospects.

"Copper prices have broken out of their recent range, but in the near term I question how much further they can go," said Tim Radford, analyst at adviser Rivkin in Sydney.

Uncertainties over China's economic growth and its potential to stimulate growth plus a fragile recovery in Europe and the United States were also dampening the outlook for demand, Radford added.

Three month copper on the London Metal Exchange traded flat at $6,882 a tonne by 0740 GMT, not far from Wednesday's two-month peak of $6,940 a tonne. LME copper was on track for a weekly gain of around 2 percent, its biggest weekly advance in seven weeks.

The most-traded August copper contract on the Shanghai Futures Exchange slipped by 0.6 percent to 48,210 yuan ($7,700) a tonne but not far from two-month highs of 48,750 yuan touched in the previous session.

LME copper stocks have dropped to the lowest since 2008 while on the Shanghai Futures Exchange inventories are the smallest since late 2011.

Reflecting the lack of spot material, LME cash prices have surged to a $56 premium against the benchmark contract this week, up from a discount in mid-April and the highest in more than two months. <CMCU0-3>

Signs China's economy is stuttering is eroding confidence that copper can push to new highs, while China's own production has been climbing.

Business confidence in China cooled in the first quarter compared to the same time last year, a central bank survey showed on Friday, another indication that the Chinese economy is faltering.

New applications for U.S. unemployment benefits hit a seven-year low last week while consumer prices recorded their largest increase in 10 months in April, pointing to a firming economy.

The euro zone economy grew much less than expected at the start of the year and inflation remained locked in the 'danger zone' below 1 percent, increasing pressure on the European Central Bank to ease monetary policy at its next meeting in June.

Next week, traders will watch U.S. new home sales for April and well as the minutes of the most recent U.S. monetary meeting for hints on its economic growth. From China, an initial estimate of manufacturing growth is due. (Source : Reuters)