Copper hits 8 month-low as eurozone fears mount

Industrial metals sank on Monday, with copper hitting an eight month-low as investors sold off riskier assets on mounting fears over theeuro zone economy's health, which knocked down its single currency.

Concerns over Hungary may be next casualty of the growing debt crisis in Europe and disappointing U.S. employment data from Friday continued to unsettle financial markets, driving investors out of commodities and equities. Following a 3 percent fall in U.S. Dow Jones index on Friday, European shares fell sharply on Monday, following their peers in Asia.

In metals, aluminium saw its lowest in eight months and zinc fell to an 11 month-low. Lead touched its lowest since May 2009, tin and nickel were at four-month lows. Copper for three-months delivery on the London Metal Exchange fell to $6,074 a tonne, its lowest since October 13 and was at $6,148.75 a tonne, versus Friday's $6,280.

"The main driver is still the read through from weaker non-farm payrolls," said analyst Daniel Major at RBS. "The most recent focus is on Hungary," he said. Hungary will need to cut about 1.0-1.5 percent of GDP off spending to meet an IMF and EU budget target this year, seeking to draw a line under "exaggerated" talk of a possible debt crisis similar to Greece's that has unnerved global markets. "Whilst Hungary is not an enormous commodities consumer, it's the fears of contagion and general off-risk sentiment," Major said, adding that he expected industrial purchases to reemerge as copper pulls back to $6,000 a tonne.

Investors are bracing for another volatile week in markets with more U.S. economic data on the way and a slew of Chinese indicators also due out including trade, industrial output and urban investment. Technical charts point to further weakness for LME copper which could soon breach $5,814, a level last seen in early October 2009, said Reuters market analyst Wang Tao.

On the fundamentals front, which analysts say is largely ignored by the market for the moment, inventories for copper at LME registered warehouses dropped by 2,250 tonnes and 6,975 tonnes for aluminium. "People in China are not that pessimistic about the outlook for metals demand, but metals prices are now decided by European issues," said a Shanghai-based metals trader.

Battery material lead was at $1,560 a tonne versus Friday#s $1,607 a tonne while zinc fell to $1,600 from $1,641. Tin was at $15,950 a tonne from $16,005 while aluminium was at $1,840 a tonne from Friday's $1,881. Nickel dropped $100 to $17,850 a tonne. But some investors were still keen on commodities.