The Canadian Press

Malcolm Morrison

The Toronto stock market likely headed for a lower open Wednesday amid falling commodity prices, signs China might tighten its monetary policy and earnings from the U.S. banking sector.

The Canadian dollar moved down 1.14¢ to US95.88¢ as investors took in news that volatile gasoline prices pushed Canada’s annual inflation rate up for the third straight month, to 1.3% in December.

The cost of filling up at the pump was 25.6% higher last month than December 2008. Excluding the energy component in the consumer price index, annual inflation would have stood at a tame 0.4% in December.

U.S. futures also pointed to a negative open as the Dow Jones industrial futures declined 36 points to 10,634, the Nasdaq futures stepped back eight points to 1,881.75 while the S&P 500 futures were down 5.2 points to 1,140.5.

Commodity prices backed off following newspaper report that some banks were ordered to cease lending for the rest of January after exceeding credit limits. That raised fears China’s recovery could fade, undermining a fragile global economy.

The Chinese markets were already jittery following a speech Tuesday night by Premier Wen Jiabao that many interpreted as a sign the flow of easy credit will be stanched.

Beijing has already begun to take steps to rein in stimulus-fuelled liquidity, raising reserve requirements for banks and increasing the rate paid on treasury bills.

The February crude contract on the New York Mercantile Exchange moved $1.12 lower to US$77.90 a barrel ahead of data coming out later in the morning expected to show rising oil inventories in the U.S.

The February bullion contract on the Nymex was down $9.90 to US$1,130.10 while March copper declined 4¢ to US$3.40 a pound.

Bank of America Corp. said Wednesday it lost US$5.2 billion during the final three months of 2009 as consumers struggled to make their mortgage and credit card payments and the bank repaid its government bailout money. The bank lost 60¢ per share, more than the 52¢ analysts were expecting, according to Thomson Reuters.

In other earnings news, IBM Corp. said Tuesday after the market close that it managed a 9% increase in profit to US$4.8 billion, or $3.59 per share in the last quarter as the technology company’s revenue grew for the first time in a year and a half. Both earnings and revenue beat expectations.

In overseas trading, China’s main Shanghai Composite Index dived 2.9%, Hong Kong’s Hang Seng index fell 1.8%, while Japan’s Nikkei 225 stock average lost or 0.3%.

Investors are also awaiting U.S. economic data for further signs of economic recovery. A new housing report from the Commerce Department is expected to show new home construction rose to a seasonally adjusted annual rate of 580,000 in December, a 1% increase from a month earlier. However, the Commerce Department report is also expected to show applications for building permits, considered a good barometer of future activity, fell 1.5% to an annual rate of 580,000.

Elsewhere on the corporate front, Calgary-based Superior Plus Corp. (TSX:SPB) says it has agreed to buy a 500-employee retail and wholesale fuel distributor operating in upstate New York for US$125 million. It says the Griffith Holdings business will complement its own.

A South African provincial government has surprised First Uranium Corp. (TSX:FIU) by withdrawing authorization for a new tailings storage facility. The Toronto-headquartered mining company, which lists its shares in Johannesberg and Toronto, said the decision was unexpected because two of three appeals by opponents had been withdrawn.

FP Newspapers Income Fund (TSX:FP.UN) has cut its monthly distributions to unitholders to 6¢ per unit, down 3.5¢ from its earlier rate following a refinancing of a term loan.