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By Claire Sibonney

TORONTO (Reuters) - Toronto's main stock indexfell Tuesday alongside a global sell-off of risk-proneassets after fears about the health of the European bankingsector came back into focus.

Reports that the results of Europe's bank stress tests,aimed at shoring up financial-sector confidence, were notparticularly strong and that German banks may still have toraise a lot of capital hurt stock and commodity prices asinvestors sought shelter in safer havens.

Among the Toronto index's biggest decliners, heavilyweighted financial shares lost 0.8 percent and energy sharesfell 1.1 percent.

Toronto-Dominion Bank shed 1.1 percent to C$73.58,while Suncor Energy was down 1.3 percent at C$33.47.

Base metals prices, down 2 percent, were also hit hard.Base metals miner Teck Resources was down 2.4 percentat C$38.74.

"I think we will see (the euro zone) back on the frontburner," said Jason Hornett, vice president and fund manager atBissett Investment Management.

"With countries like Greece and Spain, some of thosecountries that were concerns earlier in the year probably willcome back to the forefront, and we'll see investors reacting todifferent events going on in those markets."

A surge in gold prices to their highest level since lateJune limited the index's losses. Gold-mining stocks were up 1.3percent with Barrick Gold Corp 1.8 percent higher atC$47.93.

"I think investors are probably looking for some safehavens in this market just with that negative news on thebanking industry," Hornett said.

The S&P/TSX composite index closed down 42.94points, or 0.35 percent, at 12,101.89, with six of its 10 mainsectors lower.

The index's materials grup was up 0.5 percent on the backof the gold rally. So-called "defensive" sectors such astelecoms and utilities also advanced.

In individual company news, shares of Marathon PGMnearly doubled after Stillwater Mining Co said it wouldbuy the Canadian exploration company in a cash-and-stock dealworth US$118 million. Marathon, a top net gainer on the TSX,soared 94 percent to C$3.65.

Onex Corp lost 1.8 percent to C$28.54 afterResCare Inc said it agreed to be acquired by theCanadian private equity firm in a sweetened cash deal thatvalues the U.S. provider of home care to the elderly anddisabled at $390 million.

Alimentation Couche-Tard Inc fell 2.3 percent toC$23.46, after Casey's General Stores , the U.S.Midwest convenience-store chain fending off a takeover bid fromCouche-Tard, said it has received a rival offer.

Biovail Corp shot up more than 10 percent toC$27.52 after U.S.-based Valeant Pharmaceuticals International, which agreed to be bought by Biovail in June, said thetwo companies would cut about 25 percent of their combinedworkforce.

($1=$1.05 Canadian) (Editing by Peter Galloway)