* Euro STOXX 600 down 0.3%
* European bond yields head for negative territory
* Markets spooked as virus spreads outside China
* Gold reaches a 7-year peak
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
(Changes dateline, byline; releads; adds comments updates
prices throughout)
By Tom Wilson and Wayne Cole
LONDON/SYDNEY, Feb 21 (Reuters) - Shares across the world
fell on Friday and were set for their worst week in four as
investors dumped riskier assets for the safety of bonds and
gold, with coronavirus cases in China and elsewhere spreading.
China reported more cases of the disease on Friday, with
finance leaders from the Group of 20 major economies meeting in
Saudi Arabia over the weekend set to discuss risks to the global
economy stemming from the outbreak. Though investors have been sanguine about the long term
economic risks from the virus, a steady drip of new cases in
countries beyond China has kept worries gnawing away, with South
Korea on Friday recording over 50 new cases. Europe's broad Euro STOXX 600 .STOXX fell 0.3%, with
indexes in London .FTSE and Paris .FCHI down 0.5% and 0.3%
respectively.
"It's risk-off - bonds are being bought again and hedges are
being put into play at the moment," said Olivier Marciot,
investment manager at Unigestion.
Not helping the nerves were manufacturing surveys
underscoring the grim state of the Japanese economy.
Japan's purchasing managers' index dropped to 47.6 in
February, from 48.8, marking the steepest contraction in seven
years. European surveys painted a somewhat brighter picture, with
French business activity growing faster than expected in
February on a rebound in the service sector. Germany's private
sector expansion also held steady. British numbers were due out at 0930 GMT.
Gold and U.S. bonds were among the main beneficiaries as
funds sought safety.
Yields on 30-year U.S. Treasuries US30YT=RR fell below the
psychologically important 2% level to the lowest since September
2019.
Yields on 10-year notes US10YT=RR were down 9 basis points
for the week at 1.498%, lows last seen in September.
Ten-year German government bond yields fell to a four-month
low DE10YT=RR , with the entire yield curve on the cusp of
turning negative. The entire Dutch yield also returned to
negative territory.
Gold was last up 0.8% at $1,631.16 XAU= , having added 3.1%
for the week so far to seven-year highs.
"U.S. and EU equity markets have been sold across the board
with core global yields benefiting from safe-haven flows," said
Rodrigo Catril, a senior FX strategist at NAB.
Underscoring the economic impact from the coronavirus, the
International Air Transport Association (IATA) estimated losses
for Asian airlines alone could amount to almost $28 billion this
year, with most of that in China.
Corporate earnings are increasingly under threat as U.S.
manufacturers, like many others, scramble for alternative
sources as China's supply chains seize up.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 49 countries, fell 0.2%, while MSCI's broadest index
of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 1%.
E-Mini futures for the S&P 500 ESc1 slipped 0.3%.
YEN RALLIES
The flows into bonds have been a boon to the U.S. dollar,
boosting it to multi-month peaks against a raft of competitors
this week.
The most spectacular gains had come on the Japanese yen, as
a run of dire domestic data stirred talk of recession there and
ended months of stalemate in the market.
Still, the yen rallied on Friday, gaining 0.5% against the
dollar JPY= in European trading to 111.51 though the greenback
was still set for its best week since July 2018 with a rise of
1.7%.
"It was too soon to write off the yen as a safe haven," said
Mayank Mishra, an FX strategist at Standard Chartered in
Singapore. "I think the yen is reasserting its status as a safe
haven."
The dollar against a basket of currencies was last down 0.2%
at 99.649, but still near 33-month highs touched a day earlier.
Another casualty of its close trade ties with China was the
Australian dollar, which plumbed 11-years lows AUD=D3 .
The euro fared little better at $1.0811 EUR= , having
reached depths not seen since April 2017.
Against a basket of currencies, the dollar hit a three-year
top at 99.910 =USD having climbed 0.5% for the week so far.
Oil prices fell around 1%, with Brent crude LCOc1 futures
easing 78 cents to $58.54.
For Reuters Live Markets blog on European and UK stock
markets, please click on: LIVE/
Asia stock markets https://tmsnrt.rs/2zpUAr4
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