GLOBAL MARKETS-China virus sends chill through markets as risks rise

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* European shares fall, MSCI All-Country World Index down
0.27%
* Luxury and travel stocks suffer across the board
* Yen, gold, bonds gain on safe-haven move
* U.S. President Trump to speak at Davos

By Ritvik Carvalho
LONDON, Jan 21 (Reuters) - Global stock markets took a hit
on Tuesday as mounting concern about a new strain of coronavirus
in China sent a ripple of risk aversion through markets.
Authorities in China confirmed that the new virus could
spread through human contact, reporting 15 medical staff had
been infected and a fourth person had died. Safe-haven bonds and the yen gained as investors were
reminded of the economic damage done by the SARS virus in
2002-2003, particularly given the threat of contagion as
hundreds of millions travel for the Lunar New Year holidays.
"I'm not an expert in the pandemics, but you can look at
previous examples like the SARS outbreak, which also originated
from Asia," said Cristian Maggio, head of emerging markets
strategy at TD Securities in London.
Noting that China had initially downplayed the full extent
of the SARS outbreak, he said, "I think the market might be
fearing something similar."
The mood swing saw MSCI's All-Country World Index
.MIWD00000PUS slip as much as 0.4%, at one point wiping out
gains made on Monday. It traded down 0.27% by afternoon in
London. Asian markets were hit particularly hard.
Hong Kong, which suffered badly during the SARS outbreak,
saw its index fall 2.8% .HSI . Japan's Nikkei .N225 lost 0.9%
and Shanghai blue chips .CSI300 1.7%, with airlines under
pressure.
The chill in Asia carried over to European markets. Shares
of luxury goods makers - which have large exposure to China -
were among those declining the most. The pan-European STOXX 600
index fell as much as 1% at the open before recovering to trade
0.4% lower. .EU
U.S. E-Mini futures for the S&P 500 ESc1 eased 0.3%.
Germany's 10-year government bond yield touched a one-week
low, then bounced back after a closely watched survey showed
investor sentiment on Germany's economy came in better than
expected for December. GVD/EUR
Investors had already been guarded after the International
Monetary Fund lowered its global growth forecasts, mostly
because of a surprisingly sharp slowdown in India and other
emerging markets. There had been some relief as U.S. President Donald Trump
and French President Emmanuel Macron seemed to have struck a
truce over a proposed digital tax. agreed to
hold off on a potential tariffs war until the end of the year, a
French diplomatic source said.
Trump, marking his second meeting of global political and
business leaders at the World Economic Forum, said that trade
deals struck this month with China and Mexico represented a
model for the 21st century.
He also took aim U.S. Federal Reserve's policy decisions,
saying that the central bank "raised rates too quickly and has
lowered them too slowly."

ALL STEADY AT BOJ
The Bank of Japan cited lessened trade risks when it raised
forecasts for economic growth after holding a policy meeting on
Tuesday. As widely expected, the BOJ maintained its short-term
interest rate target at -0.1% and a pledge to guide 10-year
government bond yields around 0%, by a 7-2 vote.
Japan's yen gained on the safe-haven move and the dollar
dipped to 110.04 JPY= from an early 110.17 JPY= . It also
gained on the euro EURJPY= .
Against a basket of currencies, the dollar lost 0.1% to
trade at 97.497 .DXY , just off a four-week high of 97.729.
The Australian dollar AUD=D3 suffered from the flu worries
since it attracts large numbers of Chinese tourists, who tend to
be big spenders over the Lunar New Year holidays. Australia said
it would step up screening of some flights from Wuhan.
The outbreak was particularly badly timed as the tourism
industry has been mauled already by bushfires sweeping the
country.
Spot gold hit a two-week high of $1,568.35 per ounce XAU= ,
but eased, last trading above $1,550 an ounce. GOL/
Oil prices slid over 1%, having earlier gained on the risk
of supply disruption in Libya. O/R
Brent crude LCOc1 futures fell 1.5% to $64.22 a barrel.
U.S. crude CLc1 fell 1.28% to $57.79 a barrel.