* Euro drops to lowest in nearly two years vs dollar * China stimulus eyed, academics advise against big stimulus * Copper on track for biggest monthly fall since Sept '11 By Harpreet Bhal LONDON, May 30 (Reuters) - Copper fell on Wednesday as the euro dropped to its lowest in nearly two years on worries about the region's debt crisis and troubled banking system, while uncertainty about the scale of economic stimulus measures by China kept investors cautious. Benchmark copper on the London Metal Exchange slipped to $7,568.50 a tonne at 0858 GMT, down 1.3 percent from a close of $7,670 on Tuesday. The metal used in power and construction is down more than 10 percent so far this month, heading for its biggest monthly fall since September 2011. The euro fell to its lowest in nearly two years against the U.S. dollar, hurt by worries about Spain's soaring borrowing costs and expectations that more spending may be needed to support its ailing banks. A strong dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies. "There are some real concerns in the market about the health of the Spanish banking system and that is potentially a real threat to the situation in Europe. That is the driving theme to price action today," said Gayle Berry, analyst at Barclays Capital. The latest drop in the euro comes as the 10-year Spanish government bond yield continued to inch towards 7 percent. That was the level when other peripheral euro zone countries had to seek an international bailout. Adding to the concerns, data showed euro zone economic sentiment fell more than expected in May, as pessimism among manufacturers and retailers in particular worsened, although consumers became slightly less downbeat about the economy for the year ahead. CHINA STIMULUS EYED Investors are keeping a close eye on Beijing's vows to support the economy, after authorities last week approved a list of infrastructure investments. The world's second-largest economy will allocate an annual fund of up to 2 billion yuan ($315 million) from this year to help develop and mass produce energy-saving vehicles to cut carbon emissions, the government said. China needs to boost investment to spur economic growth but Beijing should shun aggressive fiscal stimulus, influential academics said in remarks published in leading state-backed newspapers on Wednesday. They joined a chorus of commentary countering market expectations that China might unveil a stimulus package similar to the 4 trillion yuan in spending unleashed during the global financial crisis. China is the world's largest consumer of copper, accounting for 40 percent of global demand. "Although the policy actions look exactly like the ones adopted nearly four years ago, they are not a big stimulus package. The projects were planned under the Five-Year Program, spending is more modest, and the projects and industries were chosen more selectively," Barclays analyst Yiping Huang said in a research note. Some traders said they would adopt a wait-and-see stance until there was evidence of demand picking up in downstream industries. "Major copper buyers in China recently told us their order books are still very weak. This will be a factor weighing on prices at least in the short- to medium-term," a Shanghai-based trader said. In other metals, zinc slipped to $1,889.25 a tonne from Tuesday's close of $1,914 while tin fell to $19,925 from $20,200 a tonne. Reflecting tightness in immediate supply, the premium for cash tin to three-months material jumped to $12. Lead dropped to $1,925.75 from Tuesday's close of $1,948 while nickel, which hit its lowest since December 2009 in the previous session, was at $16,643 from a close of $16,650 on Tuesday. Aluminium slipped to $2,011 a tonne. It untraded at the close on Tuesday, but was bid at $2,016. Metal Prices at 0900 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2011 Ytd Pct move COMEX Cu 341.60 -4.60 -1.33 344.75 -0.91 LME Alum 2009.00 -13.00 -0.64 2020.00 -0.54 LME Cu 7563.25 -106.75 -1.39 7600.00 -0.48 LME Lead 1924.00 -24.00 -1.23 2034.00 -5.41 LME Nickel 16621.00 -29.00 -0.17 18650.00 -10.88 LME Tin 19900.00 -300.00 -1.49 19200.00 3.65 LME Zinc 1889.00 -25.00 -1.31 1845.00 2.38 SHFE Alu 15980.00 -50.00 -0.31 15845.00 0.85 SHFE Cu* 55510.00 -750.00 -1.33 55360.00 0.27 SHFE Zin 14870.00 -105.00 -0.70 14795.00 0.51 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN

Source