Oct 12 (LTIT) -  Industrial metals prices fell on Thursday, caught by a global stock market sell-off, with lead hitting its lowest in more than two years, but the market had mostly recovered by the close of trading.

Benchmark LME lead sank to its lowest since September 2016 at $US1876 but ended the session 4.7 per cent higher at $US1999 per tonne. Aluminium touched a two week low, ending 1.3 per cent down at $US2020.

A global measure of equity prices fell to a one-year low on Thursday as investors feared an escalating US trade war with China and risks from a recent climb in interest rates.

This has overpowered positive supply and demand signals for metals, Deutsche Bank analyst Nick Snowdon said.

The US-China trade dispute has reduced demand for riskier assets and helped push the London Metal Exchange (LME) index of industrial metals down 15 per cent since June.

"There's a divergence between very supportive near-term micro fundamental trends (for metals) and much greater uncertainty at the macro level," Snowdon said.

Lead has fallen some 7 per cent since October 2 and is down nearly 30 per cent from a high in February.

A break below technical levels, including its August low, had triggered selling and intensified pressure from financial investors betting on lower prices, a trader in London said.

Supporting prices are stock drawdowns. Inventories in LME warehouses at 116,375 tonnes are down around 20 per cent this year and near 9-year lows. Stocks in Shanghai Futures Exchange warehouses have slipped more than 70 per cent this year to just over 11,000 tonnes.

The global refined lead market will, however, flip to a surplus of 50,000 tonnes next year after a deficit of 123,000 tonnes in 2018, the International Lead and Zinc Study Group (ILZSG) said this week.

Lead is likely to hold up, consultants Wood Mackenzie said in a note. "Refined supply will still exceed demand to 2021, but not to the extent that prices tank substantially," analyst Giles Lloyd wrote.

LME copper was barely changed at $US6242 a tonne after touching its weakest since September 20. It was holding above its technically important 50-day moving average at $US6098.

In two signals of a tight market, cash copper has flipped from a discount to a premium of $US11.75 over the three month contract and stocks in LME warehouses fell further to 170,100 tonnes, the lowest since mid-2016.

Zinc traded 0.8 per cent lower at $US2606, nickel ended a touch lower at $US12,675 after touching a one-week low and tin ended 1.3 per cent higher at $US19,275.