* Yen patched up after bruising week
* Euro STOXX 600 down 0.3%
* European bond yields head for negative territory
* Markets spooked as virus spreads outside China
* European business growth better than expected
* Gold scales 7-year peak
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
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By Tom Wilson
LONDON, Feb 21 (Reuters) - The Japanese yen regained its
footing on Friday after a bruising week, as the spread of
coronavirus cases knocked down stocks and boosted demand for
traditional safety plays from bonds to gold.
China reported more cases of the disease, 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 markets have largely shrugged off fears of long-term
economic damage from the virus, a steady drip of new cases in
countries beyond China - South Korea on Friday recording over 50
new cases - has kept worries gnawing away.
Among the winners on Friday were the yen, gold and
government bonds.
The yen gained as much as 0.5% against the dollar JPY= in
European trading, clawing back some ground after what had looked
set to be its worst week in 2-1/2 years. It was last up 0.3% at
111.78.
Other shelters also gained.
"It's risk-off. Bonds are being bought again and hedges are
being put into play at the moment," said Olivier Marciot, an
investment manager at Unigestion.
Gold scaled its highest in seven years and was last up 0.8%
at $1,634.49 XAU= , having added over 3% this week.
Yields on 30-year U.S. Treasuries US30YT=RR fell below the
psychologically important 2% level to the lowest since September
2019, while yields on 10-year notes US10YT=RR fell to similar
lows.
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.
The moves came at the expense of stocks. Europe's broad Euro
STOXX 600 .STOXX fell nearly half a percent at one stage and
MSCI world equity index .MIWD00000PUS was 0.2% lower and set
for its worst week in four.
Wall Street futures gauges ESc1 slipped 0.25%.
"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.
Not helping the nerves were signs that economies in Asia
were feeling the fallout from the epidemic.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS slipped 1%.
In Japan, factory activity suffered its steepest contraction
in seven years in the clearest evidence yet of the coronavirus'
damaging effects. In a vignette of the impact in Asia, the International Air
Transport Association estimated losses for the region's airlines
alone could near $28 billion this year - with most of that in
China.
Still, European surveys painted a brighter economic picture,
suggesting fallout further from Asia may be limited.
Business activity in the euro zone accelerated more than
expected this month, with France's service sector rebounding and
German private sector growth also holding steady.
British businesses also grew at a solid clip in February,
with factories posting the quickest rise in output for 10
months. YEN?
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.
Against a basket of currencies, the dollar was last down
0.1% at 99.722, retreating from 33-month highs touched a day
earlier.
As the dollar has gained against the yen, some have called
into question its status as a haven in times of economic and
geopolitical strife.
Yet some traders said on Friday reports of the yen's demise
were overdone.
"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."
For Reuters Live Markets blog on European and UK stock
markets, please click on: LIVE/
Japanese yen https://tmsnrt.rs/32exDnn
Stocks vs reported cornonavirus cases https://tmsnrt.rs/2SWdzBW
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