* Stocks arrest slide as authorities tackle spread of virus
* WHO meets Wednesday to consider severity of outbreak
* Italian bonds hit by talk of 5-Star leader resignation
* Dollar looking ready to test December highs
* Oil recovers from Libyan supply jitters
* World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Marc Jones
LONDON, Jan 22 (Reuters) - World stock markets looked to be
getting back to full strength on Wednesday, as updates from
China about the spread of a new flu-like coronavirus raised
hopes the outbreak would be contained.
Worries about contagion, particularly as millions travel for
upcoming Lunar New Year festivities, have knocked the world's
top equity markets off record peaks.
The outbreak has revived memories of the Severe Acute
Respiratory Syndrome (SARS) epidemic in 2002-03, a coronavirus
outbreak that killed nearly 800 people.
This time, China's response and candour -- in contrast to
the SARS epidemic -- have helped reassure investors concerned
about the possible global fallout.
China's National Health Commission said on Wednesday there
were 440 cases of the new virus, with nine deaths so far.
Measures are now in place to minimise public gatherings in the
most-affected regions. Stocks in London, Frankfurt and Paris scored early gains of
0.1% to 0.2%. S&P 500 futures ESc1 were up 0.5% before the
Wall Street open.
Shanghai stocks .SSEC recovered from an early 1.4% drop to
end higher. Japan's Nikkei .N225 , South Korea's Kospi index
.KS11 and Hong Kong's Hang Seng .HSI had all risen by more
than half a percentage point overnight. Australia's S&P/ASX 200
.AXJO shrugged off worries to hit a record high.
Italian government bond yields rose as much as 8 basis
points on reports the leader of the country's 5-Star party and
foreign minister, Luigi Di Maio, will step down. It was the biggest sell-off in a month and raised the risk
of another snap election in Europe's fourth-largest economy,
since 5-Star is part of Italy's coalition government.
"The initial reaction was to sell because of the heightened
political uncertainty," said Luca Cazzulani, a strategist at
UniCredit in Milan. "But there is no outright link between de
Maio's resignation and a collapse of the government."
With markets generally rising, safe plays such as gold and
the Japanese yen were weaker. The dollar .DXY was rising
towards the highs it reached in December against the other top
world currencies. /FRX
The coronavirus outbreak has spread from its origin in
Wuhan, China, to the United States, Thailand, South Korea, Japan
and Taiwan. The World Health Organization meets later on
Wednesday to consider whether the outbreak is an international
emergency.
"The call here is not that the virus is done or nipped in
the bud by any means," said Kay Van-Petersen, global macro
strategist at Saxo Capital Markets. "But there have been no big
further reported outbreaks, and the response from the Chinese
authorities has been very, very positive".
SARS FLASHBACK
Airlines, other travel-exposed stocks and retailers
vulnerable to shifts in consumer sentiment have borne the brunt
of selling in the past two days, along with the Chinese yuan.
MSCI's airline industry index .dMIWO0AL00P posted its
biggest daily drop in more than three months on Tuesday. Airline
shares were still falling on Wednesday.
"While details on the coronavirus are scant, we reckon that
the SARS period could offer some clues as to how markets could
pan out," analysts at Singapore's DBS Bank said. "The trends are
clear: Yields and stock prices fell in the first few months of
the SARS outbreak and rebounded thereafter."
So far, the yield on U.S. 10-year government bonds has
stabilised after Tuesday's drop, sitting at 1.78% US10YT=RR in
European trading. US/
Spot gold XAU= gave back some gains to trade at $1,555 per
ounce and the yuan eased in the onshore market CNY=CFXS to
6.8997 per dollar.
Oil prices also settled back as traders figured a
well-supplied global market would be able to absorb disruptions
that have cut Libya's crude production. O/R
Brent crude LCOc1 was down 0.31% at $64.39 a barrel and
U.S. crude CLc1 fell 0.43% to $58.13 a barrel.