Three-month copper on the London Metal Exchange lost 0.37 percent to $7,970.75 a tonne by 0340 GMT. Prices are up 4.9 percent so far this year. The most-traded March copper contract on the Shanghai Futures Exchange dropped 0.45 percent to 57,740 yuan ($9,200) a tonne. "We have seen the price come off a little today in Shanghai, so the downgrade has had a little bit of an impact, but I don't see significant pressure on prices," said commodities analyst Bonny Liu of Macquarie Securities in Singapore. "For the short term, the Lunar New Year is going to put some pressure on the price but we do see a seasonal pickup after the break." China is by far the biggest consumer of copper, accounting for around 40 percent of refined demand for the metal used in power cables and construction. China's businesses will be shut during the week of Jan. 22 for the Lunar New Year celebrations. The United States is also closed on Monday for the Martin Luther King holiday. In wider markets, faltering risk appetite and a more robust dollar against the euro were keeping metals' upside in check. Asian shares fell on Monday on heightening worries that the mass sovereign debt rating cuts by Standard & Poor's would further aggravate euro zone funding difficulties and recapitalisation, threatening to derail progress in resolving the debt crisis. Speculators in copper remained bearish, a bet they have held on to for almost 20 weeks, as demand prospects continued to be clouded by Europe's debt crisis and signs of slowing growth in top consumer China, US Commodity Futures Trading Commission (CFTC) figures showed on Friday. They increased those shorts by 454 contracts to 2,465 lots. Reflecting widespread lack of clarity on the price of copper, which is seen as a bellwether for industrial health, were two polar views of its price outlook for 2012. Goldman Sachs said on Friday it expected upside for copper prices, citing greater supply risks and stronger fundamentals. But Standard Bank said it expected prices to fall, citing the sovereign debt crisis in Europe and the potential it will produce fallout around the world. FUTURES CURVE Front-month copper in Shanghai fell into a discount against the most actively traded third month contract last week, having traded mostly at a premium since August, signalling demand is tailing off heading into the Lunar New Year. But on Monday the discount narrowed, suggesting markets may be beginning to price in tighter copper supply after the break. "The market is very quiet today. The narrowed spread may relate to rolling a short position from March to April, as the April open interest has increased again, or that the drop in spot prices has caused traders to buy on the dip," a Hong Kong based trader added. Further ahead, markets were watching Chinese data for signals on the region's demand picture, Credit Suisse Private Banking said in a note.