NEW YORK, Nov 9 (Reuters) - Cotton futures settled lower on
Wednesday on investor sales and switch trade as macro weakness
in Europe spilled into fiber contracts, although late
short-covering pared losses, analysts said.

The key December cotton contract on ICE Futures U.S.
fell 0.44 cent to conclude at 97.18 cents per lb, moving from
96.62 to 98.18 cents.

Total volume traded Wednesday hit around 20,300 lots,
nearly a quarter above the 30-day norm, preliminary Thomson
Reuters data and ICE Futures U.S. data showed.

'We are holding,' said Sharon Johnson, senior cotton expert
at commodity brokerage Penson Futures in Atlanta, Georgia. She
said some of the bearish impact of the latest euro zone news
was quickly digested by the market.

Stocks and the euro tumbled Wednesday as Italian borrowing
costs spiked, raising fears the country will be forced to seek
a bailout that could overwhelm the euro zone's finances and
push the region into recession.

That pushed cotton down to its lows for the day, but the
market stabilized and gradually came back, dealers said.

The monthly U.S. Agriculture Department's supply/demand
report did not yield any surprises for the cotton market.

USDA cut U.S. 2011/12 cotton production, world cotton
production and world cotton consumption.

'The report is very neutral,' said Johnson.

On a technical level, dealers said the downside targets in
cotton is at 95.78 cents, basis December.

Analysts said followers of index funds also continued to
roll positions out of the December contract before it goes into
first notice day for deliveries later in the month.

Open interest in cotton, usually taken as an indicator of
investor exposure there, stood at 165,589 lots as of Nov. 8,
exchange data showed.

Total volume traded Tuesday in the cotton market reached
36,055 lots, the highest level traded since June 10 and up from
the prior tally of 31,532 lots, ICE futures U.S. data said.