(Adds Parmalat comment, analysts)

MILAN (Reuters) - Parmalat (PLT.MI: Quote, Profile, Research) shares fell sharply on Wednesday after a U.S. judge dismissed much of its multi-billion-dollar lawsuit against Citigroup (C.N: Quote, Profile, Research), raising investor concerns any settlement could be less than hoped.

Judge Jonathan Harris of Bergen County Superior Court threw out claims by the Italian dairy food group against U.S. bank Citigroup for fraud, racketeering and unjust enrichment, and a claim for punitive damages. [ID:nN15473766}

But he said Citigroup still had to face a May 5 jury trial in the case.

Parmalat had sought more than $7 billion in the lawsuit, one of dozens of cases stemming from its collapse in 2003 under about 14 billion euros of debt.

Parmalat said in a statement on Tuesday the ruling had "narrowed Parmalat's claims and the measure of damages."

Its shares were down 4.95 percent at 2.2575 euros by 0807 GMT, the heaviest loser among Milan's leading shares , after touching a low of 2.2 euros.

"The market was hoping for an out-of-court settlement. Instead, sending Citigroup to trial will draw out the process," said one trader in Milan.

Santander Private Banking analyst Andrea Paladini said in a note he saw "a slight negative impact on our valuation" because of the decision, adding that "we were expecting a 3 percent recovery ratio" on the claims against Citigroup.