London Metal Exchange base metals fell across the board Thursday, triggered by fears that China may tighten its monetary policy to cool its economy and bearish U.S. manufacturing data, but a period of consolidation is expected over the near-term, said market participants.

Concerns that China may hike interest rates following China 1Q GDP coming in +11.1% on-year triggered an initial wave of selling across many asset classes, including base and precious metals, according to traders.

Three-month copper fell roughly 2% from Wednesday driven primarily by technical selling and fund liquidation, said one London based broker. Weaker U.S. economic data also exacerbated the bearish environment, the broker noted.

Manufacturers in the Philadelphia area saw only the mildest expansion in activity in April, with growth in the sector coming in below expectations.

In a report Thursday, the Federal Reserve Bank of Philadelphia said that its business conditions index, a gauge of the health of the region's manufacturing sector, had a reading of 0.2 in April, flat from March. Economists had expected April's reading to stand at 2.5.

Negative readings indicate a contraction in activity, while positive ones denote expansion.

However, consumer and bargain-hunting provided good underlying support, according to another broker.

In addition, LME data Thursday showing a drawdown in copper stocks by 1,500 tons was also supportive. Overall copper stocks have fallen some 6% since the start of April.

The market also continues to keep a close watch on developments over supply disruptions at PT Freeport Indonesia's Grasberg copper and gold mine. Thousands of workers have gone on strike at the mine, which produces 1,800 tons of copper and 9,000 troy ounces of gold a day.

The strike is expected to continue until Friday, when negotiations between labor representatives and the company resume.

In other metals, three-month zinc fell roughly 2% to a PM kerb of $3,600/ton. The weakness was triggered after prices broke through the 200-day moving average of $3,640 a metric ton and due to spillover weakness from the entire base metals complex, said a London trader.

Adding to bearish sentiment, World Bureau of Metal Statistics said Wednesday that global zinc market in surplus by 84,000 tons during January, February of '07.

Meanwhile three-month tin reversed its earlier gains to fall in sympathy with the base metals complex.

Over the past two days, tin prices have fallen over 10% triggered by news that PT Koba Tin, Indonesian's second-largest tin producer, was granted an export license.

Indonesia produces about 120,000 tons of tin a year, around one third of global supply. Last October, the Southeast Asian country closed dozens of small-scale smelters that together produced about half the country's annual tin output on allegations they were purchasing tin ore illegally, damaging the environment and evading taxes.