*
* Equities rise cautiously in Asia
* Investors trying to measure spread of coronavirus
* Oil prices extend rebound from 13-month lows
(Updates throughout, changes byline, dateline)
By Sujata Rao
LONDON, Feb 12 (Reuters) - A drop in the number of new
coronavirus cases and the Federal Reserve chairman's optimistic
view of the economy lifted world stocks for a third day on
Wednesday and sparked a 2% rally in oil prices, on hopes the
epidemic's effects would be contained.
China reported its lowest number of new coronavirus cases
since late January, lending weight to a prediction from its
senior medical adviser that the outbreak might be over by April.
A continued decline in new cases would inflict would keep the
epidemic from doing as much economic damage as initially feared,
Those reports encouraged investors to get back into equities
at the expense of bonds, gold and the Japanese yen -- safe-haven
assets that benefited as the virus death toll mounted.
"The virus may retard the modest upturn in global trade and
manufacturing output which we predict to unfold from the second
quarter of 2020s. But it seems unlikely to derail it," analysts
at Berenberg told clients.
The damage to Western economies in particular "will likely
be modest and mostly temporary," the bank said.
MSCI's global equity index rose 0.12% to stand just off
Tuesday's record highs .MIWD00000PUS . A pan-European equity
index rose to a record .STOXX as automobile stocks -- which
depend on exports to China -- jumped 1.2% .SXAP .
Futures indicated Wall Street would extend gains from
Tuesday, when the S&P 500 and Nasdaq posted record closing highs
ESC1 .N .
In Asia, mainland Chinese and Hong Kong shares rose almost
1% .CSI300 . The offshore-traded yuan reached two-week highs
CNH=D3 . The Thai baht, Korean won and Taiwanese dollar,
reliant on Chinese tourism and trade, gained 0.3% to 0.5% THB=
KRW= TWD= . The yen slipped 0.3% JPY=EBS to a three-week
low against the dollar.
Brent crude futures rose from 13-month lows, helped by the
likelihood producers would cut output LCOc1 . Brent is still
down almost 20% from its peaks in early January.
Some noted it remained unclear whether the coronavirus had
peaked. Some Chinese companies said they were laying off workers
as supply chains for goods had ruptured. "Evidence suggests the positive mood will continue, and we
see some coordination in markets with oil rallying, base metals
up and Treasuries coming under pressure," said Michael McCarthy,
chief market strategist at CMC Markets in Sydney. But "I am not
ready to buy risk assets yet."
U.S. RESILIENCE
Yields on U.S. Treasuries and German Bunds US10YT=RR rose
3 to 4 basis points. Ten-year U.S. yields are now 13 bps off the
four-and-a-half-month lows hit late January though almost 30 bps
below where they started 2020.
Yields had risen on Tuesday after U.S. Federal Reserve Chair
Jerome Powell said the U.S. economy was "resilient". Powell also
said he was monitoring the coronavirus, because it could lead to
disruptions that affect the global economy. The dollar had risen to four-month highs against a basket of
currencies .DXY but inched off those levels on Wednesday.
U.S. markets also got a boost from signs President Donald
Trump might be re-elected in November, since centrist candidates
for the Democratic nomination appear to be struggling
. "Trump had a great start into the U.S. election season.
After the early end of the impeachment trial in the Senate and
the Iowa caucus chaos for the Democrats, betting markets suggest
that Trump has a 58% probability of winning re-election on 3
November," Berenberg noted.
The day's big currency mover was the New Zealand dollar
NZD=D3 , which rose 0.8% for its biggest daily gain since
December, after the central bank dropped a reference to further
rate cuts, suggesting its easing cycle might be over.