Benchmark copper on the London Metal Exchange (LME) rose 1.4% to $8,918 a tonne, up from a four-and-a-half-month low of $8,714 hit earlier this week on concerns about the contagion impact of the U.S. recession.

Data showed Americans filing new claims for unemployment benefits fell more than expected last week, suggesting worries about the labor market are overblown.

Traders said inflation data showing China is retreating from deflation also supported improved sentiment in stocks and commodities.

"US jobs data has boosted sentiment, copper is following stocks," a metals trader said, adding that falling inventories in warehouses monitored by the Shanghai Futures Exchange (ShFE) also provided support.

Copper stocks at ShFE warehouses have fallen 15% over the past two months to 286,305.

Hopes of a recovery in China’s copper consumption were highlighted by the Yangshan premium, a closely watched indicator of China’s import demand, rising to around $55 a tonne this week, its highest since March.

“Lower prices have seen (Chinese) demand start to pick up, with wire and cable companies reporting orders rising, but still modestly,” Macquarie analysts said.

Traders are awaiting July data on China’s new yuan loans and total social financing, seen as indicators of future industrial metals demand. Both are due in the next few days.

Elsewhere, zinc prices jumped to $2,737 a tonne, their highest since July 23, as gains were fuelled by a sustained break above the 200-day moving average around $2,660.

Zinc rose 3.3% to $2,734. A trader said the buying was driven by expectations of higher energy costs, which account for about 50% of zinc production costs.

Among other metals, aluminium rose 1.7% to $2,313 a tonne, lead rose 3.2% to $2,028, tin rose 4.2% to $31,785 and nickel rose 1.2% to $16,345.