* TSX down 134.25 points, or 1.2 percent, at 11,488.66 * Financials, mining shares lead losses * Fears about Spain, Greece rattle markets * Nexen Inc surges 50 pct after takeover bid By Jon Cook TORONTO, July 23 (Reuters) - Canada's main stock index was down sharply on Monday midday, led by financial and mining shares as investors fretted about an escalation of Europe's debt crisis on fears Spain may have to seek a full bailout and on renewed concern about Greece. For the second straight session fears about Spain rattled equities markets. Spanish media reported on Monday that up to six regions may seek aid from the central government after Valencia asked for funds on Friday, sending the yield on Spanish 10-year debt to a euro-era high of over 7.5 percent. "We've got a lot of worries and unease in the markets today," said Fred Ketchen, director of equity trading at ScotiaMcLeod. "It's a serious condition and until they get this fixed up, these are the kinds of days that we're going to have to look forward to." Most of Canada's 10 main sectors were down more than 1 percent. The powerhouse financial services group led declines, falling 2.1 percent as investors worried about what a broader Spanish bailout would mean for the global financial system. Losses were sharpest among the country's largest banks, with Royal Bank of Canada falling 2.2 percent to C$51.26, Bank of Nova Scotia down 2 percent at C$51.12, and Toronto-Dominion Bank dropped 1.8 percent to C$78.58. Mining stocks also fell sharply, with the heavyweight materials sector plunging 2 percent as base metals and gold prices sank as euro zone concerns weighed on the outlook for metals demand. "When it looks as though there will be less demand simply because of falling economic expansion, then I can understand why the prices would be down in the manner in which they are," said Ketchen. Declines were led by Potash Corp, down 1.8 percent to C$45.17, Barrick Gold, which fell 1.7 percent to C$34.37, Teck Resources, off 3.6 percent at C$29.49, and First Quantum Minerals, which fell 3.4 percent to C$17.33. At 12:10 p.m. EDT (1610 GMT), the Toronto Stock Exchange's S&P/TSX composite index was down 134.25 points, or 1.2 percent, at 11,488.66. At one point the index touched 11,416.49, its lowest since July 12. The gloomy picture was compounded by fresh concerns over Greece's future within the euro zone which surfaced ahead of a visit to Athens by a group of international lenders on Tuesday. They must decide if the government has done enough to qualify for further rescue payments and avoid a chaotic default. The International Monetary Fund on Monday dismissed a weekend news report that it may refuse to continue supporting Greece as it prepares for talks with the new Greek government on its international bailout. Despite a big drop in oil prices on Monday, Canada's energy sector remained in positive territory, up 0.9 percent, on the strength of a couple of prominent acquisitions of Canadian oil and gas firms by Chinese energy giants. Shares of Nexen Inc surged more than 50 percent to C$26.29 on Monday after China's state-owned oil company CNOOC announced it plans to buy the Canadian rival for $15.1 billion. CNOOC said it would pay $27.50 cash per share, a 61 percent premium to Nexen's closing price in New York on Friday . "That's a fairly substantial premium that CNOOC has paid for this situation," said Ketchen. "Nexen shareholders have got to be happy about that." In a separate deal, Talisman Energy Inc shares jumped nearly 6 percent to C$11.70 after Canada's No. 6 oil and gas exploration company said on Monday that Sinopec Corp had agreed to buy a 49 percent stake in its North Sea operations for $1.5 billion. In other news, Research In Motion Ltd edged up 0.7 percent to C$6.92 after a regulatory filing showed Canadian investor Prem Watsa has become the embattled BlackBerry maker's largest known shareholder, nearly doubling his stake to just under 10 percent. Watsa is the chief executive of insurer and investment company Fairfax Financial Holdings Ltd and a RIM board member since January.