SHANGHAI (Dow Jones)--Copper on the Shanghai Futures Exchange fell Thursday, tracking weakness on the London Metal Exchange overnight as a stronger dollar against the euro weighed on sentiment amid escalating worries about Italy's debt problems. The benchmark March copper contract settled 1.7% lower at CNY54,320 a metric ton. The red metal stayed firmly in negative territory as investors were concerned about Italy's ability to keep its borrowing costs down, despite a successful short-term bond auction overnight. The weakness in sentiment led to the euro falling to a 11-month low against the dollar in Europe Wednesday, and the single currency was still trading lower against the greenback in Asian hours. At 0700 GMT, the euro was at $1.2928, after dipping to a fresh 11-month low of $1.2887, down from $1.2940 in late New York trade Wednesday. A stronger dollar against the euro makes dollar-denominated metals on LME more expensive to other currency holders, keeping SHFE metals under pressure. "It's just like what we had before the [Christmas] holiday, in that euro-zone concerns continue to plague the market, so we may see some technical rebound along the way, but the overall trend is to the south," a Shanghai-based trader said. Metal investors seemed to be unfazed by slightly-improved sentiment from the Chinese equities markets, which inched up for a second consecutive day on expectations that the central bank may cut banks' reserve ratios in January. "Hopes of an RRR cut had already been factored in metal prices, which are more correlated with sentiment in overseas markets these days, so downward pressure is still there given Europe's persistent debt problems," Everbright Securities Futures analyst Xu Yongqi said. Copper traded at the Changjiang Nonferrous Metals Trading Market, a major spot metals market in Shanghai, was quoted at CNY54,600-CNY54,750/ton compared with CNY55,350-CNY55,450/ton Wednesday. Three-month LME copper ended Wednesday's PM kerb $176 lower at $7,464/ton. It was quoted 1% lower at $7,389.5/ton at 0700GMT, when the SHFE is closed. Benchmark aluminum settled 0.4% lower, zinc lost 1.1% and lead fell 0.8%. Thursday's settlement prices in yuan a ton and LME late kerb prices from Wednesday in dollars a ton: Metal SHFE LME Copper Mar 54,320 Down 950 3Mo 7,464 Down 176.0 Aluminum Mar 15,840 Down 60 3Mo 1,999 Down 17.0 Zinc Mar 14,565 Down 165 3Mo 1,810 Down 45.0 Lead Feb 15,055 Down 125 3Mo 1,959 Down 60.0 -Yue Li contributed to this article; Dow Jones Newswires; (8621) 6120 1200; yue.li@dowjones.com

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