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TORONTO (Reuters) - Toronto's main stock index tumbled more than 2 percent on Thursday, nearing a one-month low, as rising yields on European bond sales sparked a widespread selloff in commodities that sent material and energy shares lower.
Falling gold, copper and silver prices played havoc with TSX mining stocks, which plunged more than 4 percent. Gold miners accounted for most of that as bullion's worst one-day drop in nearly two months caused the gold-mining subindex to fall 3.5 percent. <GOL/>
Copper fell 3 percent to its worst one-day decline in three weeks, while silver slid nearly 7 percent. <MET/L>
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE ended down 258.93 points, or 2.13 percent, at 11,915.43, its lowest point since October 21.
The TSX's retreat mirrored the downturn on global markets after a rise in Spain's borrowing costs to almost 7 percent at an auction kept European debt contagion fears alive.
"The sentiment on the economic outlook for the euro zone appears to be becoming ever more grim," said Pat Mohr, a commodity market specialist at Scotia Capital.
It was the biggest selloff for Canadian commodities since early October, said Mohr, adding that the economic turmoil in Europe has investors selling equities and commodities to raise cash.
Energy issues finished down 2.4 percent as U.S. crude fell by more than $3 a barrel, a day after it topped $100. <O/R> Canadian Natural Resources (CNQ.TO) led that sector's decline, falling 3.9 percent to C$37.19.
Solid U.S. economic data helped cushion the losses. New U.S. claims for jobless benefits hit a seven-month low last week, while permits for home construction rebounded strongly in October, bolstering views the economy has been gaining traction.
"If we didn't have that outstanding problem in Europe we'd actually see the (index rising)," said Robert Kavcic, economist at BMO Capital Markets.
As Europe's economy suffers beneath its debt burdens, investors feared it could start to seriously affect the profits of North American banks.
A Fitch Ratings report on Wednesday said U.S. banks could be greatly affected if "contagion continues to spread beyond the stressed European markets".
Canadian banks, which have limited exposure to euro zone debt, were down on Thursday, with the index's financial sector falling nearly 2 percent.
Healthcare was the only TSX sector not in the red, rising 1.4 percent, boosted by SXC Health Solutions Corp's SXC.TO announcement it will buy privately held smaller rival HealthTrans LLC for $250 million. SXC's shares rose more than 7 percent to C$54.40.
In other company news, Magna International Inc (MG.TO) shares rose 0.7 percent to C$35.35 after it said it will acquire German parts maker BDW Technologies' aluminum die casting operations in Europe. <ID:N1E7AG0KF>
Editing by Rob Wilson and Peter Galloway