SHANGHAI, Aug 04, 2011 (Dow Jones Commodities News via Comtex) -- Base metals on the Shanghai Futures Exchange were sharply lower in early trade Friday, as investors shed riskier assets amid increasing concerns over the strength of the global economy.

In the wake of a weak U.S. trading session that saw the Dow Jones Industrial Average lose more than 500 points, SHFE copper slid 2.2% at open, and later extended the fall to be down 3.2% at CNY69,270/ton. Risk aversion also sent zinc contracts to their initial daily 6% limit-down at CNY17,165/ton shortly after the open.

Analysts said fundamentals are taking a back seat for now, with metals investors focusing on macroeconomics.

"The main concern is the [global] slowdown in economic growth these days, and I won't be surprised to see metals pull back further next week," Shanghai Cifco Futures analyst Fang Junfeng said.

Fears grew further over the debt contagion in Europe despite the European Central Bank's decision to restart purchases of troubled euro-zone bonds, as investors were worried that sovereign-debt problems in euro-zone economies may be worse than many had expected.

The euro was sold heavily in early Asian trade, hitting a near-one-month low against the dollar at $1.4053. It regained its footing later, clawing back to $1.4111 around 0245GMT, compared with $1.4100 late Thursday in New York.

Despite worries over the prospect of a U.S. double-dip recession, the dollar held relatively steady against the euro in European trade overnight, pressuring dollar-denominated metals on the London Metal Exchange which in turn pushed down SHFE metals.

Some industry participants said the steep decline in prices is overdone and they see currently low prices as a buying opportunity.

Some industry participants said the decline looks overcooked, presenting buying opportunities.

"It strikes me that the market is overreacting a little these days, and I would certainly grab this chance to buy on dips," said a Shanghai-based trader with a domestic brokerage. "After all, we still need to look at metals' fundamentals, and I'm pretty positive on copper for the rest of the year."

Barclays Capital said in a note that commodity-market participants are overlooking the bigger picture of a market that remains fundamentally well supported.

"In copper, for instance, our fundamental view is that the market will tighten enough in the second half of this year to drag inventory levels to all-time lows and push prices sharply higher moving into the fourth quarter."