GLOBAL MARKETS-Stocks dip on surging virus cases, stimulus doubts

* Unease over record virus cases in Europe, U.S.
* German DAX hits three-month low as SAP slumps
* Investors seek dollar safety
* Italy bond yields slide after S&P move
* Eyes this week on central bank meetings, U.S. GDP data
* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn

By Tom Arnold and Wayne Cole
LONDON/SYDNEY, Oct 26 (Reuters) - Global shares started the
week on the back foot on Monday as surging coronavirus cases in
Europe and the United States clouded the global economic
outlook, while China's leaders meet to ponder the future of the
economic giant.
The United States has seen its highest ever number of new
COVID-19 cases in the past two days, while France also set case
records and Spain announced a state of emergency. That combined with no clear progress on a U.S. stimulus
package and caution ahead of Nov.3 U.S. election to drag the
MSCI world equity index .MIWD00000PUS down 0.2%. In Europe,
the Euro STOXX 600 .STOXX shed 0.8%, while S&P 500 futures
ESc1. fell 0.9%.
"The decreasing likelihood of U.S. fiscal stimulus
pre-election, possibly even pre year-end, as well as worsening
virus numbers and increasing lockdown measures all seem to be
taking the shine of what was a rather complacent market view of
the outlook," said James Athey, investment director at Aberdeen
Standard Investments.
Europe became the second region after Latin America to
surpass 250,000 deaths on Saturday, according to a Reuters
tally, as many European countries reported their highest number
of COVID-19 cases in a single day. Milan's blue-chip index .FTMIB sank 1.2% as new curbs on
public venues overshadowed Friday's positive news that ratings
agency S&P Global upgraded the nation's sovereign outlook to
stable from negative. The German DAX .GDAXI slumped as much as 2.7% to a
three-month low after software company SAP SAPG.DE abandoned
medium-term profitability targets and warned its business would
take longer than expected to recover from the pandemic.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS shed 0.2%. Japan's Nikkei .N225 finished 1%
lower, and South Korea's main index .KS11 lost 0.7%.
Chinese blue chips .CSI300 shed 0.6% as the country's
leaders met to chart the nation's economic course for 2021-2025,
balancing growth with reforms amid an uncertain global outlook
and deepening tensions with the United States. In a packed week for monetary policy decisions, Canada's and
Japan's central banks are expected to hold fire for now, while
the market assumes the European Central Bank will sound cautious
on inflation and growth even if it skips a further easing.
Data due out Thursday is forecast to show a consumer-led
31.9% rebound in U.S. economic output in the third quarter,
after the second's quarter's historic collapse.
Analysts at Westpac noted such a bounce would still leave
2020 GDP around 4% below last year's, with business investment
still lagging badly.
As markets increasingly price in the likelihood of a
Democratic president and Congress and resulting rise in
government spending and borrowing, U.S. 10-year Treasury yields
hit their highest since early June last week at 0.8720%
US19YT=RR . They were trading at 0.81% on Monday.
"We have raised the probability of a Democratic sweep,
already our base case, from 40% to just over 50% and have
increased our expectation of Biden to win from 65% to 75%,"
NatWest Markets analysts said in a note.
"We see steeper U.S. yield curves and a weaker USD as likely
to prevail in our base case."
Italian government bond yields slid across the curve to
one-week lows after S&P Global's unexpected outlook upgrade.
The benchmark 10-year yield dropped 9 basis points to 0.68%
IT10YT=RR and the spread over German bonds tightened to 126
bps DE10IT10=RR . Surging coronavirus cases sent investors to the safety of
the dollar after it fell broadly last week.
An index tracking its value against a basket of currencies
firmed 0.2% to 92.95 =USD , while euro/dollar - the most traded
currency pair and part of the index - fell 0.3% to 1.1831
EUR=EBS . L1N2HH0GN
In commodity markets, gold XAU=. edged down 0.2% to
$1,897.35 per ounce. GOL/
Oil prices extended last week's losses as the prospect of
increased supply and resurgent coronavirus infections worried
investors. O/R
Brent crude LCOc1 was down 3% at $40.52 a barrel. U.S.
West Texas Intermediate (WTI) dropped 3.2% to $38.57.



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Global assets http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets http://tmsnrt.rs/2ihRugV
MSCI All Country Wolrd Index Market Cap http://tmsnrt.rs/2EmTD6j
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