Source: The Canadian Press

The Toronto stock market headed for a lower opening on Tuesday as oil and copper prices backed away after China’s central bank raised interest rates in a bid to dampen high inflation.

The People’s Bank of China announced Tuesday that the benchmark one-year deposit rate would rise by a quarter percentage point to three per cent and the one-year lending rate would increase by the same amount to 6.06%.

It was the second move to tighten rates in just over a month.

The Canadian dollar was slightly higher, up 0.06 of a cent to 101.05 cents US as the greenback weakened against other currencies including the euro.

U.S. futures indicated a slightly lower start to the session with the Dow Jones industrial futures off seven points to 12,101, the Nasdaq futures up 0.5 of a point at 2,346 and the S&P 500 futures dipped 0.9 of a point at 1,315.

Chinese Inflation jumped to a 28-month high of 5.1% last November before moderating in December, but it has worried leaders who fear that a sharp rise in living costs could trigger unrest.

China has made other moves to tackle inflation over the last year, such as ordering banks to raise the amount of money they must keep on reserve.

Investors have usually reacted negatively to these Chinese moves to slow the economy since strong demand from that country and other emerging markets was largely responsible for the resource-heavy TSX gaining 14% during 2010 and, more recently, record-high prices for copper.

Commodity prices fell amid concerns that a slowing Chinese economy will hurt demand.

The March crude contract on the New York Mercantile Exchange fell $1.30 to US$86.18 a barrel.

Prices also fell as fears ease that protests in Egypt could disrupt Middle East crude supplies.

Oil jumped above US$92 to a 26-month high last week as violent clashes between supporters and opponents of Egyptian President Hosni Mubarak raised concern that shipping through the Suez Canal _ a major transit point for crude oil and cargo _ could be affected.

The March copper contract on the Nymex was down three cents to US$4.54 a pound.

Gold prices moves higher with the April bullion contract in New York up $3.10 to US$1,351.30 an ounce.

In Asia, China’s rate hike came after the markets had closed. Investors will be interested to see how Shanghai’s stock markets trade Wednesday when they reopen following the Lunar New Year holidays.

Earlier, the Nikkei 225 rose 0.4% while Australia’s S&P/ASX 200 added 0.5% and Hong Kong’s Hang Seng index slipped 0.3%.

London’s FTSE 100 was off 0.19%, Frankfurt’s DAX rose 0.14% and the Paris CAC 40 dipped 0.06%.

Earnings will be a major focus for Canadian investors this week with several major corporations reporting, including Gildan Activewear (TSX:GIL) and Teck Resources (TSX:TCK.B) on Tuesday.