* TSX down 151.34 pts, or 1.2 percent, to 12,337.51
* Italian bond yields hit 7 pct, sparking fears
* Energy, financial shares lead market lower
* Gold prices help offset losses (Adds further analyst comment, details)
By Jon Cook
TORONTO, Nov 9 (Reuters) - Canadian stocks fell more that 1 percent on Wednesday, with resource companies reeling, as a spike in Italian bond yields sparked fears Europe's debt crisis has entered a dangerous new phase that will threaten global growth.
Global stocks and commodity prices took a pounding after Italy's 10-year bond yields rose above the precarious 7-percent level, which had previously caused other European Union countries such as Greece, Ireland and Portugal to seek bailouts. [MKTS/GLOB]
"It's the market realizing that today is a day it has to be more concerned with risk instead of growth," said Michael Simpson, senior portfolio manager at Sentry Select Capital Corp. "The companies that have a higher exposure to an expanding economy are suffering."
At midday, the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was down 151.34 points, or 1.2 percent, to 12,337.51 after hitting a session low of 12,270.93, it's lowest point in nearly a week.
Energy stocks led the Canadian market lower, falling nearly 2 percent. The biggest drag was Suncor Energy Inc (SU.TO), which plunged 3.2 percent to C$32.23.
Financial stocks were the next biggest weight, dropping 1.6 percent, led down by Royal Bank of Canada (RY.TO), which fell 2 percent to C$45.48.
With a debt burden of about 1.9 trillion euros, Italy is considered too difficult to bail out, and a default would probably send Europe into recession and drag on global growth.
"It's fear of contagion," said John Kinsey, portfolio manager at Caldwell Securities Ltd. "They're the third-largest economy in Europe and this is really where the fear factor comes in. It's not just Greece with 10 million people."
"If their (EU) economy goes down that affects China because they were a big importer from China and people are worried the Chinese economy will slow."
The broader market uncertainty over Europe's debt crisis helped boost gold prices above $1,790 an ounce, which led to a 1 percent gain for Canadian gold mining stocks. [GOL/]
Barrick Gold (ABX.TO) led the sector's gains, rising nearly 2 percent to C$53.51. Goldcorp (G.TO) was up 2.1 percent to C$54.58.
In company news, First Quantum Minerals (FM.TO) shares fell more than 10 percent to C$20.60 a day after the Vancouver-based miner lowered its full-year production outlook to reflect a dip in quarterly production. [ID:nL4E7M83WT]
Shares of patent licensing firm Wi-Lan Inc WIN.TO fell more than 6 percent after it cut its full-year outlook as sales to its major dish television customers slowed. [ID:nL4E7M92BY]
WestJet Airlines (WJA.TO) shares fell 2.5 percent to C$12.81, after Canada's No. 2 carrier reported lower third-quarter profit on higher maintenance and jet fuel costs. [ID:nL4E7M92S4] (Editing by Jeffrey Hodgson)