Source: The Canadian Press

The Toronto stock market looked set for a sharp decline at the open Wednesday as oil and metal prices retreated amid a much more cautious view of the economic revival by the U.S. Federal Reserve and further signs of a slowing Chinese economy.

The Canadian dollar moved 0.46 of a cent lower to 96.41 cents US.

U.S. futures backed off after the Federal Reserve said at the end of its meeting on interest rates Tuesday that “the pace of recovery in output and employment has slowed in recent months.”

The Dow Jones industrial futures tumbled 130 points to 10,488, the Nasdaq composite index lost 28.75 points to 1,867.75 and the S&P 500 futures were down 16.3 points to 1,103.4.

The Fed on Tuesday kept its benchmark interest rate unchanged below 0.25% and said rates would remain ultra-low for an extended period of time.

The central bank also announced that it would be reinvesting the annual proceeds from maturing mortgage backed securities into the U.S. government bond market in an attempt to drive down borrowing costs and help the economy refind its footing.

However, investors are worried that the measures don’t amount to much — most economists reckon it’s only worth just over US$10 billion a month.

“The Federal Reserve yesterday bowed to the inevitable, but only just,” said Jeremy Batstone-Carr, director of private client research at stockbrokers Charles Stanley in London.

Commodity prices also declined following reports of further weakness in the Chinese economy.

Economic growth slowed from 11.9% in the first three months of the year to 10.3% in the second quarter as Beijing rolled back its stimulus after China rebounded quickly from the global slump. Chinese leaders say they want to steer growth to a more sustainable level, but the slowdown was sharper than many analysts expected.

Inflation spiked to its highest level this year as summer flooding wrecked crops but analysts said the increase will likely prove temporary.

Also, China’s retail sales increased by 17.9% in July, but it was below the 18.5% consensus in the markets.

Strong Chinese demand has been instrumental in helping the global economy recover from recession.

And robust growth has been particularly beneficial to commodity prices and, in turn, to oil and mining companies on the resource heavy Toronto stock market.

Demand worries pushed the September crude contract on the New York Mercantile Exchange down 92 cents to US$79.33 a barrel.

The September copper contract in New York lost three cents to US$3.28 a pound while December gold gained $5.20 to US$1,203.20 an ounce.

In Asia, Tokyo’s Nikkei 225 stock average closed down 2.7%, Hong Kong’s Hang Seng shed 0.8% however the Shanghai Composite Index gained 0.5%.

London’s FTSE 100 index fell 1.54%, Frankfurt’s DAX lost 1.64% while the Paris CAC 40 was down 1.61%.

Investors also took in a variety of earnings reports from the Canadian corporate sector.

Newspaper publisher, broadcaster and cable TV operator Quebecor posted net income of $65.5 million for the three months ended June 30, a decrease from $76.8 million in the comparable period a year ago. On a per share basis that’s $1 versus $1.19 a share the same time last year. Quebecor says it booked a series of higher expenses in the period, including a $31.2 million increase in income taxes and $16.7 million on valuation and financial instruments expenses. Revenue increased 5% to $994 million.

Montreal-based toymaker Mega Brands Inc. (TSX:MB) handed in a second-quarter profit of US$1.2 million, or nil per share, compared to loss of $13.3 million, or 36 cents per share a year ago. Net sales increased 12% to $78.8 million.

Paper company Cascades Inc. (TSX:CAS) reported net earnings of $21 million, or 22 cents per share, in the second quarter. That compares with net earnings of $28 million, or 28 cents per share, for the Quebec-based company in the same period a year ago. Sales rose by 2% quarter-to-quarter to $998 million thanks to higher selling prices and a 9% increase in shipments.

On Tuesday, silicon metals producer Timminco Ltd. (TSX:TIM) said it narrowed its second-quarter loss to $9.7 million from $24 million a year ago as sales roared back to life following a dismal 2009. Sales jumped 54% to $34.3 million.