TMX Broadcast Centre is pictured in Toronto on May 16, 2011. THE CANADIAN PRESS/Frank Gunn

TORONTO - The Toronto stock market headed for a sharply lower open Friday amid worries about a slowdown in China's economy and fourth-quarter earnings in the U.S. that haven't quite met expectations.

The Canadian dollar was ahead 0.14 of a cent to 90.24 cents US as Statistics Canada said the consumer price index for December rose 1.2 per cent on an annual basis, compared with 0.9 per cent in November, largely because of higher gasoline prices.

U.S. futures signalled a second day of sharp losses after data showed China's manufacturing sector unexpectedly moved into contraction territory during January. HSBC’s purchasing managers’ index for China dipped this month to 49.6, the lowest level since July. Numbers below 50 indicate contraction.

The Dow Jones industrial futures fell points to after plunging 176 points on Thursday, the Nasdaq futures moved 22.8 points lower to 3,591 while the S&P 500 futures fell 12.25 points to 1,812.

Also weighing on markets has been a slew of fourth-quarter earnings reports out this week that have disappointed on revenue growth.

At the same time, S&P Capital IQ says that 65 per cent of the first 102 companies to report have beat analysts expectations.

But investors are wary of a U.S. market that hasn't experienced a serious correction in almost 18 months while the S&P 500 soared about 30 per cent last year.

Another weight on markets is the U.S. Federal Reserve. Much of last year's rally was made possible by Fed stimulus in the form of massive bond buying. But the central bank announced last month it was cutting those purchases by US$10 billion a month to $75 billion.

The Fed holds its next interest rate meeting next week and traders will be anxious to see if the Fed reduces its asset purchases further.

In earnings news Friday, Procter & Gamble said its second-quarter net income fell 16 per cent to $3.43 billion, or $1.18 per share as the world’s largest consumer products maker faced tough comparisons from a year ago, the stronger dollar and flat sales globally. But its adjusted earnings still beat expectations. Revenue was flat at $22.28 billion, short of the $22.34 billion in revenue analysts expected.

After the close Thursday, Microsoft reported revenue and earnings for its fiscal second quarter that topped Wall Street expectations. Net income climbed to $6.56 billion, or 78 cents per share, from $6.38 billion, or 76 cents per share, a year ago. Revenue rose 14 per cent to $24.52 billion. Analysts polled by FactSet expected earnings of 68 cents per share on revenue of $23.67 billion.

Commodity prices were mixed with March crude oil contract down 33 cents to US$96.99 a barrel.

The February gold bullion contract rose $8.10 to US$1,270.40 an ounce while March copper was unchanged at US$3.29 a pound.

European markets fell with London's FTSE 100 index down 0.99 per cent, Frankfurt's DAX lost 1.3 per cent and the Paris CAC 40 dropped 1.35 per cent.

In Asia, Japan’s Nikkei 225 slipped 1.9 per cent with investors cautious ahead of Monday’s release of trade data for December that is expected to show a further widening of Japan’s deficit thanks to rising import costs.

But China’s Shanghai Composite Index gained 0.6 per cent, Hong Kong’s Hang Seng shed 1.3 per cent and Seoul’s Kospi dropped 0.4 per cent.

News from © The Canadian Press, 2014