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TORONTO (Reuters) - Canadian stocks hit a 10-day low on Friday as resource issues slumped on weaker oil and gold prices and as optimism over progress in Europe's debt crisis faded after Spain set a deficit target bigger than allowed by the euro zone's new fiscal pact.
Six of the TSX's 10 main sectors were lower, led by the heavyweight materials and energy groups, which both slid more than 1 percent.
"Oil is reversing course a little this week so that's driving a little bit of the weakness in the TSX," said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Missouri.
U.S. crude oil futures fell 2.3 percent a day after hitting a 10-month high above $110 on supply concerns in the Middle East.
Countering the sector's slide, Progress Energy Resources Corp (PRQ.TO) rose 6.7 percent to C$11.50, after the natural gas explorer signaled higher liquids production, prompting at least one rating upgrade.
Gold producers were led lower by Barrick Gold (ABX.TO), down 0.8 percent to C$46.87, and Kinross Gold (K.TO), which was down 3.1 percent at 10.78, as bullion notched its biggest weekly drop this year.
A drop in silver and copper prices hit Silver Wheaton SLW.TO, which tumbled 2.9 percent to C$37.15, and Teck Resources TCKb.TO, down 2.6 percent at C$38.52.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE finished down 79.64 points, or 0.6 percent, at 12,643.82, its lowest close since February 21. The index was down 0.6 percent for the week.
"We look at how strong performance has been in the equities markets so far in 2012 and it's reasonable to assume that you're going to get these periods where, after strong gains, you get a more choppy environment," added Fehr.
The European Central Bank's move to inject 500 billion euros ($660.25 billion) in cheap, 3-year loans into the banking system this week had increased risk sentiment, but doubts returned on Friday after Spain set a softer 2012 deficit target than one agreed under the euro zone's austerity drive.
"You're having a few second sober thoughts about some of the issues that continue to lie ahead," said Robert Gorman, chief portfolio strategist at TD Waterhouse.
Canadian financial shares were down 0.4 percent, despite bank earnings this week that beat analyst estimates. Royal Bank of Canada (RY.TO), the country's largest bank, was the biggest drag, falling 0.7 percent to C$56.40. On Thursday, RBC's shares jumped 2 percent after its quarterly profit beat expectations and it increased its dividend.
National Bank of Canada (NA.TO) shares rose 1.1 percent to C$78.32 a day after the No. 6 bank reported its quarterly profit rose 3.1 percent.
Financials weren't helped by data on Friday that showed Canada's economic growth slowed markedly in the final quarter of 2011.
"It's going to continue to be a recovery that progresses at a relatively moderate rate," said Fehr.
In other news, shares of Sears Canada Inc SCC.TO surged almost 7 percent to C$13.04 after the retailer said on Friday it will shut three major downtown stores in Vancouver, Calgary and Ottawa, in a move that will allow it to raise capital to revamp stores in other locations.
Editing by Rob Wilson