The Financial Times report that Standard & Poor's issued the warning roiled the euro, metals and other markets which had risen earlier when an agreement between France and Germany inspired optimism that European leaders were nearing a solution to the region's debt crisis. Europe's debt crisis has been the biggest overhang for copper investors this year, crimping demand prospects for a metal essential in the development of everything from housing to automobiles. London Metal Exchange (LME) three-month copper fell to $7,927.50 per tonne by 3:15 p.m. EDT (2015 GMT), backing away from its session close at $7,940. In New York, the key March COMEX contract was down 3.25 cents at $3.5520 per lb in late electronic trade, erasing an earlier positive settlement at $3.6155 per lb. "We are reaching a point now (in the euro zone debt crisis) where it's all or nothing and a critical decision has to be made or it could be the beginning of something quite nasty," said Barcap analyst Gayle Berry. "Given that the European debt crisis has been the single biggest weight on metals prices, if we do get something that the market receive favourably then I think you could see an improvement in prices particularly on the back of short covering." An upbeat view of Chinese consumption gave copper another early boost on Monday, after Beijing moved last week to cut reserve requirements for commercial lenders for the first time in three years. "I think there is an undercurrent of people feeling a little better about the China situation ... the ease in the reserve requirements and the potential for a soft landing," said Steve Shafer, who helps manage $300 million as chief investment officer of Oklahoma City-based Covenant Investors. Futures volumes stood at a thin 37,250 lots in late New York trade, nearly 37 percent below the 30-day norm, according to preliminary Thomson Reuters data. French President Nicolas Sarkozy and German Chancellor Angela Merkel agreed on a master plan for imposing budget discipline across the region, saying the EU treaty will need to be changed. Sentiment also received an early boost from news that Italy had unveiled a 30-billion-euro package of austerity steps, while Ireland also detailed 2.2 billion euros worth of spending cuts. MIXED BAG Data out earlier showed the service sector in China shrank in November, mirroring similar weakness seen last week in data from the country's manufacturing sector. The numbers were a mixed bag for market sentiment, reinforcing expectations that Beijing could ease monetary policy further, which could boost metals prices. Also, copper has been moving out of mostly Asian-based LME warehouses since October, while stocks in Asian bonded warehouses fell 11.6 percent last week. This signals good Asian demand that could only be aided by easier monetary policy. In the United States, the pace of growth in the vast US services sector slowed in November to the slowest since January 2010, according to the Institute for Supply Management.