* Spain fiscal problems in focus, German debt sale eyed * Euro pressured by Sarkozy comments * Premium for cash copper to benchmark highest since Aug 08 By Harpreet Bhal LONDON, April 18 (Reuters) - Copper prices edged higher on Wednesday, holding above $8,000 a tonne, as surging shares in China helped boost sentiment, but gains were kept in check by lingering caution about the euro zone debt crisis and a stronger dollar. Benchmark copper on the London Metal Exchange (LME) traded at $8,065 a tonne at 0921 GMT, up 0.2 percent from Tuesday's close of $8,050 a tonne. The metal used in power and construction earlier rose to a high of $8,125 a tonne to trade just below its 100-day moving average. Prices fell to three-month lows earlier this week, prompting some bargain hunting in the previous sessions. LME prices rose in tandem with Shanghai copper after China shares posted their biggest one-day percentage rise in more than two months. So me traders said a Reuters report that South Korea's central bank would buy $300 million in Chinese stocks over the next three months helped Shanghai copper rise on the perception investors were ready to take on more risk. "I'm not at all surprised that copper has recovered a bit of poise on the back of a slightly more optimistic outlook in the (Chinese) equity market. There has been a high degree of correlation between equities and commodities," said Nic Brown, head of commodities research at Natixis. "(But) Europe will remain a problem and that will hold things back. It's a question of whether the positive news we get elsewhere in the world is enough to push against that." Keeping the pressure on metals prices was a fall in the euro against the dollar, after the French President Nicolas Sarkozy said a strong euro hurt exporters and should be discussed with the European Central Bank. Caution about Spain's fiscal problems also weighed on the euro. A strong dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies. After rising more than 11 percent in the first quarter this year, LME copper prices have since fallen to levels below $8,000 a tonne. It is up around 6 percent in the year to date. "LME Copper has broken below the key $8,131 February low and has topped. The outlook technically has become increasingly negative," Commerzbank technical analysts said in a note. "Intraday rallies are expected to be capped by $8,294, the 50 percent retracement of the recent sell off." In a sign of squeezed supply, the premium for cash copper shot to $114 against the benchmark three-month contract on Wednesday, its highest level since August 2008. "Given the pull back in copper to levels not seen since January it is not surprising there has been some buying interest around and tightness in the spread ahead of the third Wednesday (today) also suggests there has been some aggressive short-covering and rolling forward of short positions," FastMarkets said in a note. "Whether the tightness now passes remains to be seen." EUROZONE CAUTION Strong demand at a Spanish bill auction on Tuesday soothed fears of a flare up in the euro zone crisis, but the rise in short-term borrowing costs underscored the challenges still facing the highly indebted country. [ID: nL6E8FH400] The focus now turns to a two-year German bond sale on Wednesday, which some fear could struggle given ultra low yields. Spain will also auction two- and 10-year bonds on Thursday, while France, where uncertainty over the outcome of a presidential election is rising, is also due to sell debt. "Spain is one to watch. Given the way the market manages to fixate on Europe, yes, it does have the possibility of holding metals prices back for a little while yet," Brown said. In Italy, a draft document due to be approved by the cabinet of Prime Minister Mario Monti on Wednesday showed Italy would delay by a year its plan to balance the budget in 2013 due to a weakening economic outlook. In other metals traded, aluminium rose to $2,081 a tonne from Tuesday's close of $2,075.50, while zinc rose to $1,996 from $1,992. Lead was at $2,074 from $2,075 while nickel was at $17,800 from $17,825. Tin was at $21,300 from $21,650. Metal Prices at 0925 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 364.65 -0.05 -0.01 344.75 5.77 LME Alum 2081.00 5.50 +0.26 2020.00 3.02 LME Cu 8059.75 9.75 +0.12 7600.00 6.05 LME Lead 2073.00 -2.00 -0.10 2034.00 1.92 LME Nickel 17800.00 -25.00 -0.14 18650.00 -4.56 LME Tin 21260.00 -390.00 -1.80 19200.00 10.73 LME Zinc 1995.00 3.00 +0.15 1845.00 8.13 SHFE Alu 16110.00 60.00 +0.37 15845.00 1.67 SHFE Cu* 57820.00 1290.00 +2.28 55360.00 4.44 SHFE Zin 15535.00 165.00 +1.07 14795.00 5.00 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN

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