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* TSX down 49.29 points, or 0.4 percent, at 12,095.63
* Six of index's 10 main groups lower (Updates to midmorning, adds quote)
By Jennifer Kwan
TORONTO, Sept 7 (Reuters) - Toronto's main stock index fell on Tuesday morning as oil and base metals prices sank on a stronger U.S. dollar and renewed concerns about Europe's banking sector.
Weakness in the index's commodity and banking-linked sectors showed up in such stocks as Suncor Energy (SU.TO), down 0.8 percent at C$33.64; Teck Resources TCKb.TO down 3.2 percent at C$38.45; and Toronto-Dominion Bank (TD.TO), which shed 1.6 percent to C$73.24.
World stocks were lower while the euro fell broadly after the Wall Street Journal reported that Europe's recent "stress tests" on major banks underestimated some lenders' holdings of potentially risky government debt. [MKTS/GLOB]
"The concerns that upset everyone in May and June are still hanging around," said Barry Schwartz, vice president and portfolio manager at Baskin Financial Services, referring to worries about the health of the European banking sector.
Schwartz said there is also lingering concern about U.S. unemployment and sluggish global growth.
At 10:05 a.m. (1405 GMT), the S&P/TSX composite index .GSPTSE was down 49.29 points, or 0.4 percent, at 12,095.63, with six of its 10 main sectors lower. The TSX index had opened slightly higher before turning negative.
Schwartz also said investors were taking a breather after the market's recent rally. "We've been up 8 (sessions) in a row. Valuations now maybe are a little bit stretched," he said.
Leading the way lower were energy issues, down 0.8 percent, and financials, which fell 1.3 percent.
A surge in gold prices to their highest level since late June limited the index's losses. Gold rose as investors returning from North America's Labor Day holiday bought the metal as a safe haven from concerns about the health of the European banking system. [GOL/]
In individual company news, Stillwater Mining Co SWC.N said it would buy Canadian exploration company Marathon PGM (MAR.TO) in a cash-and-stock deal worth US$118 million as it seeks to expand its platinum and palladium resources. [ID:nN07218937] Marathon, a top net gainer on the TSX, soared 93 percent to C$3.63.
ResCare Inc RSCR.O said it agreed to be acquired by Canadian private equity firm Onex Corp OCX.TO, down 0.9 percent at C$28.80, in a cash deal that values the U.S. provider of home care to the elderly and disabled at $390 million, after Onex sweetened its initial bid by 65 cents a share. [ID:nSGE6860G8]
Casey's General Stores (CASY.O), the U.S. Midwest convenience-store chain fending off a takeover bid from Canada's Alimentation Couche-Tard Inc (ATDb.TO) said on Tuesday it has received a rival takeover offer. [ID:nN07218734] Couche-Tard was down 0.8 at C$23.82.
$1=$1.04 Canadian Reporting by Jennifer Kwan; editing by Peter Galloway