* TSX down 126.27 points, or 0.81 percent, at 15,398.55 * Eight of 10 main index sectors decline * Valeant tumbles 7.4 percent after cutting outlook By John Tilak TORONTO, July 31 (Reuters) - Canada's main stock index declined on Thursday as Argentina's default kindled worries about the stability of the economic recovery in the region and shares of Valeant Pharmaceuticals International fell after the company cut its outlook.
Further, geopolitical tensions remained high as Russia announced measures to try to counter U.S. And European sanctions over Ukraine.
The benchmark TSX, which has been one of the strongest performers among global stock indices this year, pulled back after hitting a record high in the previous session.
Argentina defaulted for the second time in 12 years after hopes for a midnight deal with holdout creditors were dashed.
Investors tried to gauge the effect of the news on broader financial markets and economies beyond Argentina, and the uncertainty resulted in a spike in volatility.
"It's a destabilizing event. It's a wake-up call to investors that there are still pretty significant risks in some areas of the emerging markets, including Argentina," said Andrew Pyle, senior wealth advisor and portfolio manager at ScotiaMcLeod.
"The contagion effect of this event is still unclear, and that's what investors are going to be wrestling with today and into the weekend," he added.
The Toronto Stock Exchange's S&P/TSX composite index was down 126.27 points, or 0.81 percent, at 15,398.55. Eight of the 10 main sectors on the index were in the red.
Shares of energy producers gave back 1.7 percent. Canadian Natural Resources Ltd lost 1.7 percent to C$48.05, and Talisman Energy Inc fell 2.7 percent to C$11.54.
Suncor Energy Inc reported a drop in second-quarter profit late on Wednesday, and its shares shed 2.1 percent to C$44.82.
Valeant, embroiled in a battle to take over Botox-maker Allergan Inc, cut its full-year profit and revenue forecasts to reflect the sale of its rights to several skincare products. The stock tumbled 7.4 percent to C$127.32.
Open Text Corp reported on Wednesday a better-than-expected 42 percent jump in quarterly revenue, largely driven by higher demand for its cloud services. Shares of the business software maker shot up 14.6 percent to C$60.69.
(Editing by Chris Reese)