* Euro pins hopes on euro zone finance ministers' meeting
* Chinese stocks fall after Friday's tightening, drag on
others
* Copper, U.S. crude softer; U.S. markets closed
(Updates prices)
By Ian Chua
SYDNEY, Jan 17 (Reuters) - The euro eased on Monday as
investors waited to see if officials will agree to beef up a
euro zone safety fund, while Asian shares mostly fell, led by
drop in Shanghai in the wake of China's latest attempt to
contain inflation.
European Central Bank Jean-Claude Trichet gave the thumbs up
for a bigger safety-net fund on Sunday, a day before a regular
meeting of euro zone finance ministers, who are due to discuss
an increase in the effective lending capacity of the European
Financial Stability Facility (EFSF).
Some analysts played down the chances of a clear outcome
this week and pointed to a Feb. 4 European Council meeting as a
more likely stage for such decisions to be made.
Still, this week's meeting could give investors a better
sense of how much agreement or dissent there is among euro zone
members to enlarging the facility.
Any disappointment could see the euro come under renewed
pressure. For now, the euro was at $1.3330 , having
rallied some 4 percent last week to a one-month high around
$1.3456 on Friday.
"There could be a further upside for the euro if confidence
in the rescue scheme grows. But I think the euro has already
risen to pretty good levels," said a trader for a Japanese trust
bank in Tokyo.
Meanwhile, a breach of key support took the Shanghai
Composite Index down nearly 3 percent at one stage to
lows not seen since early October.
The steep fall in Chinese stocks spooked other markets.
Japan's Nikkei erased most of its gains to close flat,
while shares elsewhere in Asia fell 0.6 percent .
South Korea's KOSPI , which hit a record high early
in the session, ended 0.4 percent lower, Hong Kong's Hang Seng
index shed 0.3 percent and Australia's S&P/ASX 200 index
slid 0.8 percent.
Chinese bank shares were among the biggest losers after
China on Friday raised banks' required reserves (RRR) for the
fourth time in over two months.
On Monday, Chinese media said the central bank has devised
calibrated reserve ratios for different banks to tighten curbs
on bank lending and tame quickening inflation.
Investors also sold global miners like BHP Billiton
on worries China's voracious appetite for commodities will cool.
BHP fell 1.2 percent.
"With growth still strong, Beijing will likely battle
inflation wholeheartedly. Get ready for more hikes in both RRR
(at least another 150 bps) and interest rates (two, 25 bps) in
the next six months," HSBC economists Qu Hongbin and Sun Junwei
wrote in a report.
According to EPFR Global, flows into the emerging market
equity funds that it tracks slowed in the week ended Jan. 12 due
to worries that high inflation rates will trigger more measures
to rein in price pressures.
But underlying appetite for risk persisted, with emerging
market local currency and high yield bond funds enjoying solid
weeks, EPFR noted.
Asian high-yield bond issuers have wasted no time this year
in taking advantage of the healthy appetite for their paper.
Last week, PRC property developer Evergrande Real Estate
Group made history with a 9.25 billion yuan ($1.4 billion)
synthetic renminbi bond issue, the biggest to date in the fast
growing market.
Commodity prices fell, with U.S. crude oil nearing
$91 a barrel, but still not far off a two-year high of around
$92.58 set early this month.
Copper on the London Metal Exchange eased 0.3
percent to $9,622 a tonne, within reach of a record high of
$9,754 set on Jan. 4.
U.S. markets are shut on Monday for a public holiday, but
the flow of earnings results will kick up a gear this week with
Apple , Citi and Goldman Sachs among major
firms due to unveil their results.
(Editing by Kim Coghill)
(Additional reporting by Hideyuki Sano and Masayuki Kitano in
Tokyo)
