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* TSX down 448.92 points, or 3.76 pct, to 11,448.92.
* Index touches lowest level since July 2010
* All 10 main sectors lower; materials, energy weigh (Updates to afternoon, adds fresh comments)
By Trish Nixon
TORONTO, Sept 22 (Reuters) - Toronto's main stock market fell more than 4 percent on Thursday to hit its lowest level since July, 2010, as a grim economic outlook from the U.S. Federal Reserve and weak data from China stoked fears of a global recession.
Wall Street was down more than 3 percent, European stocks fell more than 4 percent to a two-year low, and the U.S. dollar rose to a seven-month high against major currencies as risk aversion gripped global markets. [MKTS/GLOB]
"It sure smells a little bit like panic," said Levente Mady, market strategist at Union Securities, in Vancouver. "Going into the weekend it could be fairly hairy. I don't really feel comfortable keeping a long position heading into Friday and Monday here."
The TSX's materials and energy groups each dropped about 6 percent, as commodity prices were pummeled.
Data showing contraction in China's manufacturing sector for a third straight month helped drive down oil prices by more than 4 percent in London and sent the price of copper to a one-year low. Gold, a traditional safe haven, slumped more than 3 percent as the dollar strengthened. [GOL/] [O/R] [MET/L]
Barrick Gold (ABX.TO) was the heaviest drag on the index, down 6.6 percent at C$50.05, followed by Suncor Energy (SU.TO), which dropped 7.3 percent to C$26.07. Potash Corp (POT.TO) lost 3.9 percent to C$48.43.
At 2:51 p.m. (11851 GMT), the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was down 448.92 points, or 3.76 pct, at 11,448.92. Earlier, it sank as low as 11,445.05, its weakest point since July 2010.
The sell-off was widespread, with all 10 main index sectors lower. Financials tumbled 3 percent, led by Royal Bank of Canada (RY.TO), down 3.4 percent at C$44.99 and Toronto-Dominion Bank (TD.TO), down 3.1 percent at C$69.93.
"It doesn't matter what sector you look at, you're looking at substantial drops in value here today. And I guess, given the world situation, we probably knew something like this was coming," said Fred Ketchen, director of equity trading at ScotiaMcLeod.
"There's fear, there's worry, there's talk about lack of growth."
Thursday's market meltdown came after weeks of worries that Europe's debt crisis could freeze the global financial system, and a day after the Federal Reserve disappointed markets with its latest effort to boost the economy by lowering long-term borrowing costs. The Fed also spooked investors with its stark outlook for the U.S. economy.
Mady said that with interest rates already at zero in the U.S., there was little more that policy-makers could do to help stimulate the economy and rally markets. He drew comparisons to the Japanese economy, where interests rates have been at zero percent for close to 20 years.
"When you get to zero percent, they can't help any more. you might as well toss the Fed, all their governors and the rest, into the trash bin because they are becoming irrelevant like the bank of Japan did 20 years ago," he said.
"That means this market could be in trouble for a while."
($1=$1.03 Canadian) (Editing by Jeffrey Hodgson)