* LME copper falls a second straight day * Euro drops to lowest in almost a year against dollar * LME copper may slip to $7,305: technical analysis * Coming Up: Italian debt auction (Updates prices) KUALA LUMPUR, Dec 29 (Reuters) - London copper fell for a second straight session on Thursday as a firm dollar weighed, with investors eyeing an Italian bond auction later in the day for an indication of how the euro zone debt crisis is developing. LME copper has dropped 23 percent this year, after a 30 percent gain in 2010 and a 140 percent jump in 2009, as the euro zone sovereign debt crisis slowed credit and prompted investors to switch to safer assets including the U.S. dollar. "The biggest theme of 2012 will still be the European debt crisis," said Ong Yiling, an investment analyst at Phillip Futures in Singapore. Three-month copper on the London Metal Exchange declined 1.05 percent to $7,386.25 a tonne by 0719 GMT, extending a loss of 2.4 percent from the previous session. Most-traded March copper on the Shanghai Futures Exchange lost 1.72 percent to 54,220 yuan ($8,600) a tonne. LME copper is expected to slip to $7,305 a tonne, as indicated by a Fibonacci retracement analysis, according to Reuters technical analyst Wang Tao. A bullish target at 57,000 yuan a tonne has been aborted for Shanghai copper, with the new target at 52,830 yuan, Wang said. Worries about the impact of the euro zone problems on copper demand are being compounded by evidence of slowing growth in China, the world's top consumer of the metal. China's manufacturing activity may contract again in December, a poll of economists showed ahead of the official purchasing managers index release on Jan. 1, suggesting the world's second-largest economy is finishing 2011 on a weak note amid the global malaise. A poor result at an Italian bond auction would fan fears about the euro zone's debt crisis. While Italian bond yields are expected to fall from recent record highs in a sign the European Central Bank has managed to ease market pressure, analysts doubt whether domestic progress on reform would be enough to see Italy smoothly over its refinancing hurdles from January to April. The euro slid to a 10-year low against the yen and the lowest in nearly a year versus the dollar on Thursday, having suffered a sudden drop the previous day. Base metals prices at 0719 GMT Metal Last Change Pct Move YTD pct chg LME Cu 7386.25 -78.75 -1.05 -23.06 SHFE CU FUT MAR2 54220 -950 -1.72 -24.54 LME Alum 1989.25 -9.75 -0.49 -19.46 SHFE AL FUT MAR2 15855 -60 -0.38 -5.85 HG COPPER MAR2 335.00 -1.55 -0.46 -24.54 LME Zinc 1825.00 14.50 +0.80 -25.63 SHFE ZN FUT APR2 14585 -185 -1.25 -25.11 LME Nickel 17880.00 -20.00 -0.11 -27.76 LME Lead 1958.25 -1.75 -0.09 -23.21 SHFE PB FUT 15065.00 -85.00 -0.56 -17.90 LME Tin 19200.00 600.00 +3.23 -28.62 LME/Shanghai arb 378 Shanghai and COMEX contracts show most active months ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month ($1 = 6.3212 Chinese yuan) (Reporting by Jane Lee; Editing by Michael Urquhart)

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