* Union halts return to work at Freeport Indonesian copper mine * U.S. house prices declines in October * Coming up: U.S. Redbook, 1355 GMT By Silvia Antonioli LONDON, Dec 28 (Reuters) - Copper slipped on Wednesday in thin trade as worries about the euro zone debt crisis resurfaced ahead of a debt auction in Italy and as concerns over an economic slowdown in top metals consumer China clouded metals demand growth prospects. A report showing U.S. house prices declined in October weighed on market sentiment, although improving U.S. labour market conditions lifted consumers confidence to an eight-month high in December. "The housing sector remains the weakest link, but the U.S. economy has proved this quarter it is recovering better than expected," said Gianclaudio Torlizzi of metals consultancy T-Commodity. "What is making the market nervous is new worries about the euro zone crisis ahead of the debt auction in Italy and worries that the Chinese government will not be able to manage this physiological economic slowdown." Benchmark copper on the London Metal Exchange lost 0.68 percent to $7,589.25 a tonne by 1101 GMT from a close at $7,650 a tonne on Friday. Copper has lost more than 20 percent of its value this year, the first yearly fall since 2008, when the credit crunch hit most riskier assets. The exchange was closed on Monday and Tuesday. News that the union at a Freeport McMoran Copper & Gold Inc mine in Indonesia had halted a return to work after a three-month strike failed to lift prices as investors continued to focus on economic data. THE CHINA FACTOR As a sign of uncertainty over the extent of the slowdown in the Chinese economy, shares in Shanghai fell to a 33-month low. China consumes about 40 percent of the global copper supply, and a slowdown of industrial activity in the Asian country would have a significant impact on base metals prices. "Consumption of most of the base metals held up well in the first nine months of the year. However ... most information relating to orders, shipments and physical premiums are now pointing down," said Societe Generale in a research note. "Companies operating in downstream markets may need a number of months of positive economic data before being convinced of the merits of raising production." Fresh euro zone debt worries also hit financial markets. Although Italian short-term debt costs halved at auction on Wednesday, analysts warned that market tensions could easily reignite and pointed to a new test on Thursday, when Italy will sell up to 8.5 billion euros of longer-term bonds. The European Central Bank (ECB) allotted 489 billion euros to euro zone banks last Wednesday in a liquidity injection that was the ECB's latest effort to bolster bank finances. It hoped the move would minimise the chances of banks' responding to the debt turmoil by slamming the brakes on lending. Investors worried, however, that the liquidity would not feed through the system as banks deposited a record level of cash at the ECB. These worries were overdone, according to some analysts. "With all this liquidity around, I see prices moving upwards in the short term, and I think today's copper price is a good opportunity to buy," Torlizzi said. Also weighing on risk appetite, Iran's threat to stop the flow of oil from the Gulf supported crude prices but weighed on equity shares worldwide. In other industrial metals, aluminium was at $ 2,013 from $ 2,016 . Tin was at $19,050 from a last bid of $19,295 while zinc , used to galvanize steel was at $1,833.50 from $1,855 Fri day's close. Battery material lead was at $1,933.50 from $2,020 and nickel was at $18,449 from $18,505. Metal Prices at 1116 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 342.40 1.90 +0.56 444.70 -23.00 LME Alum 2011.00 -5.00 -0.25 2470.00 -18.58 LME Cu 7570.50 -79.50 -1.04 9600.00 -21.14 LME Lead 1992.25 -27.75 -1.37 2550.00 -21.87 LME Nickel 18456.00 -49.00 -0.26 24750.00 -25.43 LME Tin 19050.00 -150.00 -0.78 26900.00 -29.18 LME Zinc 1832.00 -23.00 -1.24 2454.00 -25.35 SHFE Alu 15915.00 45.00 +0.28 16840.00 -5.49 SHFE Cu* 55170.00 120.00 +0.22 71850.00 -23.22 SHFE Zin 14755.00 45.00 +0.31 19475.00 -24.24 ** 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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