TORONTO - The Toronto stock market sold off across all sectors on Monday in another round of worry about the Eurozone debt crisis spreading to larger economies.

The S&P/TSX composite index plunged 191.95 points or 1.44 per cent to 13,179.75 while the TSX Venture Exchange lost 39.11 points to 1,945.7.

The Canadian dollar slipped against the greenback as traders fled to the safe-haven status of U.S. Treasurys, losing 0.89 of a cent to 103.2 cents US.

Investor sentiment further soured Monday on the possibility that Europe's debt crisis might be spreading to Italy as the yield on government bonds shot up, in contrast to other big economies.

"Previously we've been worried about Greece, Portugal and Ireland which are pretty small and peripheral countries," said Kate Warne, Canadian markets specialist at Edward Jones in St. Louis. Those three countries have all received bailouts from the EU and International Monetary Fund.

"Italy is a much greater concern and that weighs."

Worries Italy could be engulfed in the financial crisis pushed the interest rate on a 10-year Italian bond up to 5.64 per cent while the rate on the German equivalent, considered the safest in the eurozone, traded at 2.67 per cent.

Italy's high debt of nearly 120 per cent of GDP and poor growth prospects have made it vulnerable to the eurozone's debt crisis. Two ratings agencies have warned the country needs to get its public finances in order or risk a downgrade.

At the same time, intense debate over how, and how much, banks and other private investors can contribute to a new rescue package for Greece has unsettled financial markets in the currency union. Rating agencies warn that even a voluntary involvement will likely be seen as a partial default of Greece on its massive debts.

"They're now beginning to address the fact that as we all know Greece won't be able to pay back those loans and the question is, what do you do about it?" added Warne.

"While it's not good news for the markets today, it's good news we are getting some serious discussions in Europe about how do you tighten things up and what do you do, even though it raises issues that investors have been choosing to ignore up until the last few days."

Sentiment on markets was already downbeat after Washington announced Friday that the American economy created just 18,000 jobs in June, which was a fraction of the figure expected.

Prices for oil and metals fell back as the U.S. dollar strengthened. A stronger greenback usually helps depress commodity prices, which are denominated in dollars, as it makes items such as oil and metals more expensive for holders of other currencies.

The TSX energy sector lost 2.6 per cent as the August crude contract on the New York Mercantile Exchange fell $1.05 to US$95.15 a barrel. Suncor Energy (TSX:SU) was 99 cents lower to C$38.30 while Canadian Natural Resources (TSX:CNQ) also dropped 99 cents to $39.37.

The September copper contract in New York lost four cents to US$4.37 a pound. The base metals sector was down 2.4 per cent with Quadra FNX Mining (TSX:QUX) down 59 cents to C$14.09 while First Quantum (TSX:FM) lost $5.60 to $130.60.

Vancouver-based Peregrine Metals Ltd. (TSX:PGM) has received a friendly US$487.1-million takeover offer from Stillwater Mining Co. (NYSE: SWC). Peregrine owns an undeveloped copper and gold deposit in Argentina's San Juan province that Stillwater plans to develop and operate. Stillwater would exchange the equivalent of C$3.16 in cash and shares for each Peregrine share, including US$1.35 in cash and Peregrine shares soared $1.79 or 221 per cent to $2.60.

All sectors were lower with the industrials group down 1.26 per cent. Canadian Pacific Railway (TSX:CP) shed 67 cents to $59.42.

The financial sector fell one per cent with CIBC (TSX:CM) down 86 cents to $74.74 while Manulife Financial (TSX:MFC) lost 56 cents to $16.31.

The gold sector had provided early support to the TSX as investors looking for safety also pushed gold prices higher, up $7.60 to US$1,549.20 an ounce. But the sector lost early traction and Kinross Gold Corp. (TSX:K) faded 25 cents to C$15.77.

Demand concerns also pressured commodity prices following the release of data Saturday showing China's inflation accelerated to a three-year high in June even as the overheated economy began to cool.

China has imposed a series of moves to slow its economy since early last year, including rate hikes and increased reserve requirements for banks. Those moves have raised worries that the strong Chinese economy, which has been instrumental in boosting the global economic recovery, could come in for a "hard landing."

Traders took in some positive news from the Canadian housing sector.

Canada Mortgage and Housing Corp. said housing starts during June blew past expectations, coming in at 197,400, the highest level in almost a year. Economists had expected 181,500 starts. Additionally, May's starts numbers were revised up to a strong 194,000 from the 184,000 originally reported.

New York markets were also negative as the Dow Jones industrial average lost 151.44 points to 12,505.76.

The Nasdaq composite index was off 57.19 points to 2,802.62 while the S&P 500 index declined 24.31 points to 1,319.49.

After the close, Alcoa Inc. kicked off the start of the U.S. second quarter earnings season by announcing profits that met expectations of 32 cents a share. But the company's revenue came in at US$6.6 billion, much higher than the US$6.31 billion that analysts expected. Its shares added eight cents to US$15.99 in after hours trading in New York.

A final decision on Rupert Murdoch's biggest takeover battle has been delayed for several months after the British government referred News Corp.'s bid for British Sky Broadcasting PLC to competition authorities, as a phone hacking scandal showed no sign of abating. News Corp.'s shares fell 7.6 per cent to US$15.48.

Valeant Pharmaceuticals International Inc. (TSX:VRX) has signed an agreement to purchase drugmaker Dermik, a unit of Sanofi, for $425 million. Valeant shares gave back 50 cents to C$50.70.

Centerra Gold Inc. (TSX:CG) has increased its 2011 exploration budget by 18 per cent to $40 million, with $4 million of the additional money allocated to a "significant" precious and base metal discovery on the Altan Tsagaan Ovoo property in Mongolia. Centerra shares improved by 51 cents.