UPDATE 2-European shares hit record high on drop in new virus cases, hopes of China stimulus

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* Chipmakers lead rally
* Miners lead gains as supply-chain fears subside
* Adidas, Puma flag coronavirus hit, but rally on Puma's
strong Q4
* Milan shares hit highest since 2008

(Updates to close)
By Susan Mathew
Feb 19 (Reuters) - European shares notched a fresh record
high on Wednesday, as a decline in the number of new coronavirus
cases and hopes of more stimulus from Beijing helped a recovery
from fears of a sustained hit to global supply and demand.
A broad-based rally saw the pan-European STOXX 600 index
.STOXX end up 0.8%, led by chipmakers that were hit last
session by a revenue warning from iPhone maker Apple Inc
AAPL.O due the outbreak.
Dialog Semiconductor DLGS.DE , STMicroelectronics STM.MI
and AMS AG AMS.S , were among the top performers on the day.
Lending weight to forecasts that the epidemic might ebb by
April, data showed the number of new virus cases in China fell
for a second straight day. Rising hopes that China will cut its
benchmark lending rate on Thursday to curb damage from the
outbreak also lent support. "It is a question of how quickly China can return to
normal," said Andrea Cicione, head of strategy at TS Lombard.
"Daily indications of falling capacity utilisation also seem
to be bottoming out and slowly start to pick up."
But the number of companies that forecast a hit to business
from the outbreak continued to increase.
Sportswear retailers Adidas ADSGn.DE and Puma PUMG.DE ,
which make almost a third of their sales in Asia, said their
business was being hurt by store closures in China and fewer
Chinese tourists shopping in other markets due to the epidemic.
Still, European shares have gained more than 4% since mid
January when the outbreak started to squeeze markets. Analysts
ascribe this partly to hopes that the damage might be temporary
as pent-up demand might see a bumper second quarter should the
outbreak be contained.
"As long as markets take the view that these disruptions do
not alter the growth trajectory for macro and earnings growth,
there is no need to react to the news flow," said TS Lombard's
Cicione.
Puma's strong fourth quarter saw it top the STOXX 600,
despite the warning, and pull up Adidas. Other luxury stocks
also rallied, with LVMH LVMH.PA and Gucci-owner Kering
PRTP.PA rose 2.5% and 3% respectively.
Commodity-linked stocks .SXPP and the auto sector .SXAP
- Tuesday's biggest casualties - also recovered. China being the
biggest consumer of iron ore, and the virus epicentre of Hubei
being an auto manufacturing hub have seen both these sectors
whipsaw since the outbreak.
London's FTSE .FTSE rose 1% as a weak pound spurred a
rally in its internationally focused blue-chips. Data showing an
unexpected surge in UK inflation in January had knocked the
currency. GBP/ .L
All eyes will now be on a flash reading of the Purchasing
Managers' Index (PMI) for the euro zone due Friday, to gain more
insights into the economic fallout from the outbreak.
Italy's main index .FTMIB rose 1%, adding to Tuesday's
gains and end at its highest since August 2008 on hopes of
further consolidation amog the country's banks after Intesa
Sanpaolo's ISP.MI 4.86 billion euro bid for UBI Banca
UBI.MI .