* Copper set for third week of falls * Euro rebounds against dollar * Copper stocks in LME-registered warehouses show drop By Harpreet Bhal LONDON, Nov 18 (Reuters) - Copper prices steadied on Friday, on course for a third week of falls as fears of contagion in the euro zone debt crisis deepened concerns about the region's growth, although a weak dollar helped limit further falls. Benchmark copper was trading at $7,547.50 a tonne at 1041 GMT, up slightly from Thursday's close of $7,545 a tonne. The metal, used in power and construction, is down 1.4 percent so far this week. It has dropped by almost 6 percent this month. Italian and Spanish government bond yields fell on Friday, with the European Central Bank buying bonds in the secondary market but longer-term concerns about the threat of debt contagion kept caution alive. Fitch Ratings warned it might lower its "stable" rating outlook for U.S. banks because of contagion from problems in troubled European markets. "The fear is that what is still a regional crisis will morph into a global crisis of confidence," Robin Bhar, analyst at Credit Agricole said. "But it's not a disaster scenario yet because developing world growth is still the key dynamic for metals." Helping to prevent further falls was a weak dollar, which dropped against the euro as traders covered short positions following a recent drop in the single currency to a five-week low. A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies. Financial markets will closely watch developments in Italy where prime minister, Mario Monti unveiled sweeping reforms to dig the country out of crisis and will face another confidence vote in the Chamber of Deputies on Friday, which he is expected to win comfortably. "Of all commodity sectors, we consider industrial metals to be particularly vulnerable to a further deterioration in market sentiment," Credit Suisse said in a note. FUNDAMENTALS INTACT In a sign that demand could be picking up, copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 11.0 percent from last Friday, the exchange said on Friday. "It's buying on dips. China will restock but it won't restock more than it needs to so that tells me that it's hand to mouth (restocking) but if the price is right they'll come in and buy," Bhar said. Latest data from the London Metal Exchange (LME) showed copper stocks in LME-registered warehouses fell by 1,375 tonnes to 398,250 tonnes. Ongoing strike action also supported copper. In Indonesia's Grasberg mine, police said gunmen killed a company security guard on Friday near the Freeport McMoRan Copper & Gold Inc's strike-bound mine as violence escalates in the two-month strike that has halted production in the world's second-biggest copper mine. Freeport's CEO said late on Thursday the strike is likely to impact the company's fourth-quarter results. Aluminium was at $2,107 a tonne from a close of $2,094 a tonne on Thursday. Zinc slipped to $1,923 from $1,927 while lead was at $2,019.25 from $2,014. Nickel slipped to $18,060 from $18,150 while tin was at $21,275. It was untraded at the close, but bid at $21,350 a tonne. Metal Prices at 1038 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2010 Ytd Pct move COMEX Cu 340.35 2.10 +0.62 444.70 -23.47 LME Alum 2106.00 12.00 +0.57 2470.00 -14.74 LME Cu 7540.50 -4.50 -0.06 9600.00 -21.45 LME Lead 2015.50 1.50 +0.07 2550.00 -20.96 LME Nickel 18050.00 -100.00 -0.55 24750.00 -27.07 LME Tin 21275.00 -425.00 -1.96 26900.00 -20.91 LME Zinc 1923.25 -3.75 -0.19 2454.00 -21.63 SHFE Alu 16025.00 -150.00 -0.93 16840.00 -4.84 SHFE Cu* 55550.00 -1130.00 -1.99 71850.00 -22.69 SHFE Zin 15040.00 -215.00 -1.41 19475.00 -22.77 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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