Toronto's main stock market index closed lower on Wednesday as a new wave of fears about Europe's debt crisis hurt miners and banking shares, offsetting gains in the oil and gas sector.

Anxiety over Europe washed over markets again as the European Central Bank's buying of Italian and Spanish bonds failed to stem a broad euro-zone bond selloff. In France, yield premiums on the 10-year government bond over German bunds hit euro-era highs.

A Fitch Ratings report said U.S. banks could be greatly affected if "contagion continues to spread beyond the stressed European markets.

"It's fair to say that deeper debt contagion would have a large impact on the broader global financial system and U.S. banks would not escape the trouble unscathed," said Gareth Watson, vice president of investment management and research at Richardson GMP Ltd.

Gold-mining stocks fell 1.4 percent as the euro-zone jitters pushed bullion to its biggest one-day drop this month.

Barrick Gold (ABX.TO: Quote) was the biggest drag, falling 1.5 percent to C$52.65. Minefinders Corp's (MFL.TO: Quote) shares plunged more than 10 percent to C$12.46 after downgrades.

Bucking the gold miners' downward trend, shares of Novagold (NG.TO: Quote) rose 24 percent to C$11.13 after the company said it is exploring a possible sale of its 50 percent stake in the big Galore Creek copper/gold project in northwestern British Columbia.

Though widely viewed as a safe-haven, gold has recently traded in line with headlines from Europe and was down with fears the European debt crisis is broadening and could engulf the economies of Austria, the Netherlands and France.

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed down 54.91 points, or 0.5 percent, at 12,174.36.

Eight of the index's 10 main sectors were negative, with gold-mining stocks leading the heavily weighted materials group to a 1.5 percent drop.

The financial sector fell 0.4 percent. Toronto-Dominion Bank (TD.TO: Quote) led the losses, falling 1 percent to C$71.73.

The TSX spent most of the day in positive territory, led by surging U.S. oil, which rose to $101.52, its highest level since June.

The move in oil was supported in part by some unexpectedly strong U.S. economic data and by Enbridge Inc's (ENB.TO: Quote) plan to reverse the Seaway pipeline by next year to help ease an oil glut at the Cushing, Oklahoma, delivery hub.

Oil's surge helped the index's energy sector, pummeled for most of the year, rise nearly 1 percent. Canadian Natural Resources (CNQ.TO: Quote) led the group's gains, jumping 3.2 percent to C$38.69.

"If this world is so concerned about global growth prospects it's very shocking that you have oil above $100 a barrel," Watson said.

"We've already seen at the beginning of this year and back in 2008 that higher oil prices do not help grow the economy and in fact it causes a contraction and downward performance in the overall market," he added.

TransCanada Corp (TRP.TO: Quote) shares climbed 0.3 percent to C$40.90 after the energy infrastructure company said it could start building the southern portion of the Keystone XL pipeline even as it awaits U.S. approval for the project as a whole.

Enbridge stock rose 0.3 percent to C$34.91 after purchasing ConocoPhillips stake in the 350,000 barrel per day Seaway pipeline for $1.15 billion, and saying it will reverse the line's flow.

The telecommunications sector, a traditional safe haven, was down nearly 1 percent, a day after Canada's communications regulator allowed big Internet service providers to charge lease fees based on the amount of capacity small providers use.

In other company news, Research In Motion's (RIM.TO: Quote) shares were up more than 0.8 percent at $19.69 after Goldman Sachs raised its rating on the BlackBerry maker.