* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Adds inflation and GDP data, comment)
By Yoruk Bahceli
LONDON, Jan 31 (Reuters) - Euro zone government bond yields held at three-month lows on Friday as coronavirus fears remained the market’s focus despite growth and inflation data releases.
The United States advised Americans not to travel to China as the death toll from the virus reached 213 and the World Health Organization (WHO) declared a global health emergency.
A growing number of airlines are suspending flights to China to halt the spread of the virus, stoking fears of a blow to global economic growth and boosting safe-haven government bonds.
“Flash” or first estimate numbers showed euro zone economic growth was slower than expected in the last three months of 2019, while yearly inflation in January picked up in line with expectations.
But excluding unprocessed food and energy - what the European Central Bank (ECB) calls “core inflation” - prices grew 1.3% year-on-year, decelerating from 1.4% in December.
“The data is from the past; it doesn’t include the emergence of the virus,” said DZ Bank rates strategist Rene Albrecht.
“It’s important that the coronavirus is contained and doesn’t spread anymore. As long as you don’t have confirmation of a slower increase in infections or smaller rise in the death toll, you won’t see any reaction by bond markets (to data).”
Most 10-year bond yields were down around 1 basis point, with Germany’s 10-year yield at -0.41%, a three-month low first hit on Thursday.
A pick-up in inflation numbers since November - alongside healthier business activity surveys - had stoked some optimism that the worst might be over for the euro zone economy, before attention turned to the spread of the virus.
“A reading just over 1% seems to be in line with the current economic situation, which means that any excitement among hawks at the higher core rate of the past two months has been premature,” ING senior euro zone economist Bert Colijn wrote in a client note.
“The ECB is on autopilot for the moment and these inflation numbers confirm that quite clearly.”
The releases followed an unexpected contraction in the French and Italian economies during the fourth quarter and German inflation numbers, which came in slightly lower than expected.
Reporting by John Stonestreet