Source: The Canadian Press

The Toronto stock market was set for a lower open Thursday as commodity prices retreated amid fears China will make further moves to slow its economy to deal with inflation.

Declining commodities punished the Canadian dollar, which was down 0.41 of a cent to 100.04 cents US.

U.S. futures also pointed to a negative open ahead of another batch of U.S. corporate earnings statements.

The Dow Jones futures lost 29 points to 11,757, the Nasdaq futures were off 2.5 points to 2,292 and the S&P 500 futures slipped 2.5 points to 1,276.

Concerns about the Chinese economy grew on news that the country’s economy grew by 9.8% in the fourth quarter of 2010, up from 9.6% in the previous three-month period.

The strong data fuelled speculation that the monetary authorities will have to do more to cool the economy and ease inflationary pressures.

Though separate figures showed that inflation did drop in December to 4.6% from the 28-month high of 5.1% the month before, price rises remain stubbornly high and could pose a danger to the Chinese economy if left unchecked.

China has moved several times over the past year towards tighter monetary policy.

Just last week, the central bank raised the amount of money banks must keep on reserve.

These moves usually have a short-term negative effect on the resource-weighted TSX since strong demand by China for commodities helped push the Toronto market up 14% last year and drove copper prices to fresh record highs as recently as Wednesday.

The February crude contract on the New York Mercantile Exchange fell 76 cents to US$90.06 a barrel.

The March copper contract on the Nymex dropped seven cents to US$4.30 a pound while the February bullion contract in New York was down $11.90 to US$1,358.30 an ounce.

In Asia, Chinese shares took the brunt of the selling. The benchmark Shanghai Composite Index dived 2.9% while the Shenzhen Composite Index for China’s smaller, second market slid 3.4%.

Japan’s Nikkei 225 stock average closed down 1.1% while Hong Kong’s Hang Seng index shed 1.7%.

London’s FTSE 100 index declined 1.33%, the Frankfurt DAX shed 0.67% and the Paris CAC 40 lost 0.25%.

On the earnings front, Morgan Stanley said its quarterly earnings increased 60 per cent to US$600 million or 41 cents a share on strong investment banking results. That was a penny better than analysts expected and its shares were up 2.5 per cent in pre-market trading in New York.

Investors will also take in results from Google Inc. after the market close.

In other corporate news, BlackBerry maker Research In Motion Ltd. (TSX:RIM) (NASDAQ:RIMM) says its talks with the Indian government over access to deciphering emails sent through its devices are “ongoing and positive.” An Indian newspaper had earlier reported that RIM had temporarily suspended talks with the government after the leaking of sensitive information related to the negotiations to the media.

Meanwhile, RIM started blocking access to pornographic content on smartphones in Indonesia, the world’s most populous Muslim nation Thursday after the government threatened to revoke its operating license. Its shares were off 0.43% in pre-market trading in New York.