* Toronto stocks give up close to 7 percent
* Potash, Agrium lead declines after downgrade
* Financial-market uncertainty continues to weigh (Adds analyst comments, details, official closing data)
By Wojtek Dabrowski
TORONTO, Oct 2 (Reuters) - The Toronto Stock Exchange's main index fell nearly 7 percent on Thursday to its lowest level in more than two years, battered by concerns over the outlook for fertilizer producers and a drop in oil and gold prices.
Broader economic worries also lingered as investors and analysts tried to predict the final fate of a multibillion-dollar bailout package by the U.S. government aimed at saving the financial services sector.
"It's really brutal out there," said Sal Masionis, a stockbroker at Brant Securities. "The most important thing is the tightness in the money market and the capital markets as a whole."
Potash Corp of Saskatchewan (POT.TO) and Agrium Inc (AGU.TO), two of the companies that helped power the Toronto market during the commodities boom, dropped more than 20 percent each after Merrill Lynch downgraded the stocks because of uncertainty over earnings for the fertilizer sector. [ID:nN02254052].
The S&P/TSX composite index .GSPTSE plunged 813.97 points, or 6.95 percent, to 10,900.54.
All but one of the composite's 10 main subgroups fell, including the powerful energy and materials groups, which shed 8.55 percent and 17.2 percent, respectively.
Potash gave up 26 percent to close at C$101, while Agrium fell 23 percent to finish at C$45.01.
The declines threatened to erode yet another of the remaining places of shelter for investors seeking refuge from the market turmoil.
Commodities also failed to lend support, as gold sank on a dollar rally and oil fell more than 4 percent as the financial crisis stoked concerns about demand.
This, in turn, weighed on Toronto-listed producers. Inmet Mining IMN.TO fell 15.3 percent to C$39.82 and Barrick Gold (ABX.TO) gave up 16.4 percent to C$33.25. Energy giant EnCana Corp (ECA.TO) fell 9.2 percent to C$59.46.
The continuing volatility led at least one money manager to advise clients to avoid stocks altogether.
"You don't go hide in equities. You've got to go hide in some fixed income, even if it's treasury bills earning 1.5 to 2 percent," said Adrian Mastracci, portfolio manager at KCM Wealth Management Inc. "Stay away from the equities at the moment."
$1=$1.08 Canadian Reporting by Wojtek Dabrowski; editing by Rob Wilson