*TSX down 292.30 points, or 2.3 pct, at 12,287.31
*All 10 main index sectors drop; gold subsector up 0.6 pct (Updates with details, comments)
By Claire Sibonney
TORONTO, Aug 18 (Reuters) - Toronto's main stock market index sold off nearly 3 percent on Thursday morning as mounting worries about a sluggish global economic recovery and fears that the European debt crisis might spread to the U.S. banking sector shook confidence.
All 10 index sectors were down sharply, but weighty safe-haven gold miners edged up 0.6 percent as bullion prices hit a record high, helping the TSX index outperform its U.S. counterparts. [.N] [GOL/]
Most other commodities, such as oil, fell hard. [O/R] [MET/L]
Among the heaviest decliners, Suncor Energy (SU.TO) dropped almost 5 percent to C$30.15, Toronto-Dominion Bank (TD.TO) fell 2.5 percent to C$74.61, and Canadian Natural Resources (CNQ.TO) lost 4.4 percent to C$34.57.
European equity markets also fell sharply as renewed worries about Europe's debt crisis and sour U.S. data added to fears that major economies were close to recession.
There was a slew of disappointing U.S. data on Thursday morning, including jobless claims, inflation, home sales and business conditions. [nN1E77H0E8]
"With Europe being off as badly as it is, it's unsurprising that we're getting similar weakness here in the North American market," said Gavin Graham, president of Graham Investment Strategy.
"You've got the continuing worries over the European debt situation and its effect on the European banking and credit but at the same time, what you're having is continued reinforcement of the weakness of the U.S. economy."
Graham noted that recent strong earnings results from U.S. retailers does not mean sales are strong, or that companies are hiring.
A report in the the Wall Street Journal that regulators were intensifying their review of European banks' U.S. units also helped unnerve investors. The report said the Federal Reserve Bank of New York has asked for more information about whether the banks have reliable access to funds needed to operate. [nL5E7JI0Q]
At 10:28 a.m. (1428 GMT), the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was down 292.30 points, or 2.3 percent, at 12,287.31. Earlier it had dropped almost 3 percent to its weakest level since Aug. 11.
"I don't think this is a one-day wonder here that we've got," said Fred Ketchen, director of equity trading at ScotiaMcLeod.
"I think that we are in a weak market, and the weak market will show some signs of modest recovery somewhere along the way, but until ... it becomes a little bit more evident that things are settling down or trying to turn around and improve, I think that we are in for these kinds of days."
Among the top gainers on the index, Yamana Gold (YRI.TO) rallied 3.1 percent to C$15.67, Agnico Eagle (AEM.TO) added 1.6 percent to C$63.65, and New Gold (NGD.TO) rose 3 percent to C$12.33.
($1=$0.99 Canadian) (With additional reporting by Trish Nixon; editing by Peter Galloway)