Source: The Canadian Press

The Toronto stock market was on its way to a lower open on Friday as commodity prices backed away in the wake of moves by China to curb inflation.

The Canadian dollar strengthened against the greenback, rising 0.16 of a cent to 98.06 cents US.

U.S. futures also declined after the Chinese government told banks they must hold more reserves after inflation in China shot up to a more than two-year high last month.

The Dow Jones industrial futures declined 61 points to 11,115, the Nasdaq futures lost 10.5 points to 2,124 and the S&P 500 futures dropped 6.1 points to 1,192.

There is also growing expectation China will raise key interest rates soon as part of the inflation fight and that raises concerns such moves could also slow China’s strong economic growth.

There have been strong hopes pinned on China and other emerging countries to help pull Western countries out of recession.

In particular, high Chinese demand for commodities has pushed up prices for oil and metals and taken resource stocks on the TSX higher.

Commodity prices weakened Friday with the December crude contract on the New York Mercantile Exchange down 16 cents to US$81.69 a barrel.

The December copper contract on the Nymex lost two cents to US$3.82 a pound while December gold lost $1.80 to US$1,351.20 an ounce.

U.S. Federal Reserve chairman Ben Bernanke took a swipe at China in his keynote speech at a banking conference in Frankfurt, Germany Friday. He argued that the country’s inflexible currency regime, which has the yuan effectively pegged at a low rate against the dollar, is preventing a much-needed rebalancing of growth in the global economy.

Meanwhile, Irish, European and International Monetary Fund officials were negotiating Friday over terms of a massive credit line for Ireland’s debt-crippled banks.

The fate of Ireland’s prized low business taxes is part of those talks.

Officials in Germany, France, Britain and Austria argue Ireland should be prepared to raise its 12.5% tax on corporate profits.

They argue it’s not fair for Ireland to receive aid from EU partners while simultaneously sticking to a tax policy that amounts to unfair competition.

In overseas trading, Japan’s benchmark Nikkei 225 stock average gained 0.1%, South Korea’s Kospi added 0.7% and Hong Kong’s Hang Seng fell 0.1%.

London’s FTSE 100 index lost 1.25%, Frankfurt’s DAX was down 0.31% and the Paris CAC 40 declined 0.81%.

In corporate news, construction and infrastructure development company Aecon Group Inc. (TSX:ARE) has been awarded a $279-million contract by Toronto Transit Commission to extend one of the city’s main subway lines northward.

H.J. Heinz Co. said growth in international markets such as Latin America, more demand for its ketchup and price increases helped second-quarter net income rise 9% to US$251.4 million. Revenue fell 1% to $2.61 billion.