Source: The Canadian Press

The Toronto stock market headed for a lower open on Monday as energy prices weakened and U.S. markets were closed for the Martin Luther King holiday.

The Canadian dollar was higher against the greenback a day before the Bank of Canada’s next announcement on interest rates. The loonie rose 0.3 of a cent to 101.37 cents US.

Oil prices softened in the wake of China’s order on Friday to state-owned banks to set aside an additional 0.5% of deposits as reserves, effective Jan. 20 in order to curb inflation. It was the seventh time in a year that the reserve rate was hiked.

The latest move to curb lending raises fears about demand for commodities.

The February crude contract on the New York Mercantile Exchange declined 43 cents in electronic trading to US$91.11 a barrel.

Copper prices were unchanged at US$4.41 a pound while bullion slipped slightly with the February gold contract in New York off 50 cents to US$1,360 an ounce.

The financial sector will be in focus after Finance Minister Jim Flaherty announced moves to tighten mortgage lending in a bid to reduce household debt levels.

Among other things, mortgage amortization periods will be reduced to 30 years from 35 years and the maximum amount Canadians can borrow to refinance their mortgages will be lowered to 85% from 90%.

The Bank of Canada is expected to leave its key rate unchanged at 1% on Tuesday.

But the accompanying statement will be scrutinized for clues as to when the bank will resume hiking rates.

Many economists expect the central bank to resume rate hikes later this year.

Overseas, China’s benchmark Shanghai Composite Index lost 3% and the Shenzhen Composite Index for China’s smaller, second exchange sank 4.3%.

Elsewhere, Japan’s Nikkei 225 stock average closed up by less than 0.1%, South Korea’s Kospi was 0.4% lower while Hong Kong’s Hang Seng index slipped 0.5%.

London’s FTSE 100 index inched up 0.04%, Frankfurt’s DAX was unchanged and the Paris CAC 40 dipped 0.14% as European finance ministers met in Brussels to discuss how to tackle the debt crisis.

All eyes are on Germany, to see if Europe’s largest economy and financier will resist boosting the size of the EU bailout fund.

Germany’s finance minister Wolfgang Schaeuble insisted Monday that bolstering the bailout fund so it can actually lend out the advertised 750 billion euros (US$1 trillion) — which it currently cannot do due to technical reasons — is as far as his country will go. Other countries had proposed to double its size.

In corporate news, Ivanhoe Energy Inc. (TSX:IE) has announced a second natural gas discovery in less than a month at its subsidiary Sunwing in southwest China.