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TORONTO (Reuters) - Canadian stocks suffered their biggest single-day decline this month on Wednesday as natural resource shares were hurt by a dramatic slide in commodity prices on concerns the euro zone financial crisis was deepening.
Base metals prices were down for the third-straight session, led by a 5 percent drop in copper and in aluminum, which tumbled to a 17-month low.
In precious metals, gold fell below its 200-day moving average <GOL/> - a key technical support it had held for nearly three years - helping to send the index's heavily weighted materials sector down more than 3 percent as miners worried about the impact a slowdown in Europe would have on demand.
"That's exactly what you'd expect in this kind of environment where commodities are selling off and there's a flight from cyclical-type sectors," said Robert Kavcic, an economist with BMO Capital Markets.
Barrick Gold (ABX.TO) led the sector's losses, falling 3.8 percent to C$46.47.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE ended down 216.89 points, or 1.8 percent, at 11,543.05. It was its biggest one-day drop since November 23.
Record-high borrowing costs for Italy roiled the market early as yields on Italian 10-year bonds rose above 7 percent, a level that had sparked bailouts for fellow euro zone members Ireland, Greece and Portugal.
Italian five-year bond yields hit a euro-era record of 6.47 percent at auction, stoking concerns that Europe's third-largest economy could default on its debt like Greece, but be too big to bail out.
"The market seems to take this as a direction of where global growth is going," said Marc-Andre Robitaille, president and portfolio manager at Robitaille Asset Management.
"Bond yields are rising so people are saying that means we'll have less economic growth and it gets translated into cyclical sectors like energy and materials," he added.
Energy shares also fell sharply, down 3 percent, after U.S. crude futures tumbled more than $5, triggering a technical selloff after dipping below its 200-day moving average.
Canadian Natural Resources (CNQ.TO), down 4.6 percent at C$35.01, and Suncor Energy SUN.AX, which dropped 3.2 percent to C$28.13, led the retreat.
Despite having little exposure to European debt assets, Canadian financial shares fell nearly 1 percent as contagion fears spurred a selloff.
Royal Bank of Canada (RY.TO) led the sector lower, sliding 0.8 percent to C$48.19.
A deal last week by European policymakers to work together to shore up the euro zone's debt burdens had sparked market optimism. But the prospect of sovereign debt downgrades and the European Central Bank's reticence to intervene to quell the crisis have sparked a broad selloff this week.
"It's very difficult to operate in these markets because the market seems to react more to sentiment than actual fundamental data," Robitaille said.
In domestic economic news, Canadian factory sales fell 0.8 percent in October as plant maintenance shutdowns hit sales in the oil sector, Statistics Canada said.
Editing By Peter Galloway