* Stocks arrest slide as authorities tackle spread of virus
* Sterling rises sharply against the dollar
* Oil tumbles as Libya supply jitters dissipate
* World FX rates in 2020 tmsnrt.rs/2egbfVh (New throughout, updates prices, market activity and comments; new byline, changes dateline, previous LONDON)
By Rodrigo Campos
NEW YORK, Jan 22 (Reuters) - World stock markets bounced back on Wednesday, as swift updates from China about the spread of a new flu-like virus raised hopes the outbreak would be contained, while oil prices tumbled as a market surplus forecast outweighed supply concerns.
Worries about contagion of the virus and its effect on the global economy, particularly as millions travel for upcoming Lunar New Year festivities, have knocked the world’s top equity markets off record peaks.
The outbreak revived memories of the Severe Acute Respiratory Syndrome (SARS) epidemic in 2002-03, a virus outbreak that killed nearly 800 people worldwide and hit Hong Kong’s economy particularly hard.
China’s National Health Commission said on Wednesday there were 440 cases of the new coronavirus, with nine deaths so far. Though Hong Kong confirmed its first case, measures are now in place to minimize public gatherings in the most affected regions.
Germany’s DAX shed most gains in afternoon trading after touching an intraday record high for the first time in nearly two years after closing at a high Tuesday. Italy’s benchmark fell after reports the leader of its co-governing 5-Star movement had resigned.
Italian government bonds saw their biggest sell-off in a month. Yields, a proxy of the country’s borrowing costs, jumped as much as 8 basis points as investors wondered whether the country’s fragile coalition would collapse.
Across the Atlantic, the S&P 500 hit a record high, boosted by waning fears about the coronavirus. An airline stock index rose 1.1% after falling as much as 3.8% on Tuesday.
“While the death toll has risen to nine, it feels like affirmation we’re getting out of China is stemming fears that this is turning into an epidemic,” said Art Hogan, chief market strategist at National Securities in New York.
IBM rallied 3.6% after better-than-expected full-year profits, while streaming giant Netflix warned the next few months would be tougher and its stock fell 2.2%.
The Dow Jones Industrial Average rose 60.8 points, or 0.21%, to 29,256.84, the S&P 500 gained 10.69 points, or 0.32%, to 3,331.48 and the Nasdaq Composite added 50.71 points, or 0.54%, to 9,421.51.
The pan-European STOXX 600 index lost 0.03% and MSCI’s gauge of stocks across the globe gained 0.30%. Emerging market stocks rose 0.65%.
Overnight, the coronavirus developments boosted Shanghai stocks from an early 1.4% drop to end higher. Japan’s Nikkei, South Korea’s Kospi index and Hong Kong’s Hang Seng all rose by more than half a percentage point and Australia’s S&P/ASX 200 hit a record high.
With markets generally rising, safe plays such as gold and the Japanese yen were weaker. The dollar was shuffling toward the highs reached in December against other major currencies.
“The call here is not that the virus is done or nipped in the bud by any means,” said Kay Van-Petersen, global macro strategist at Saxo Capital Markets. “But there have been no big further reported outbreaks, and the response from the Chinese authorities has been very, very positive”.
The dollar index rose 0.07%, with the euro down 0.05% to $1.1077.
The Japanese yen weakened 0.04% versus the greenback at 109.94 per dollar, while Sterling was last trading at $1.3137, up 0.69% on the day.
Oil prices fell sharply as traders figured a well-supplied global market would be able to absorb disruptions that have cut Libya’s crude production.
U.S. crude fell 2.33% to $57.02 per barrel and Brent was last at $63.29, down 2.01% on the day.
U.S. 2-year, 10-year and 30-year yields hit two-week lows after the Bank of Canada held interest rates steady and opened the door for possible easing.
“Going into this year, the belief was that global easing was over and things were looking better for the entire world,” said Jim Vogel, senior rates strategist at FHN Financial in Memphis.
“For Canada to sort of change its outlook fairly quickly opens up the possibility that easing could occur elsewhere too,” he added.
Benchmark 10-year notes were unchanged in price yielding 1.7691%, from 1.769% late on Tuesday.
Spot gold dropped 0.1% to $1,556.49 an ounce. U.S. gold futures fell 0.10% to $1,556.40 an ounce. Copper lost 0.88% to $6,105.50 a tonne.
Reporting by Rodrigo Campos, additional reporting by Gertrude Chavez-Dreyfuss and Saqib Iqbal Ahmed in New York, Sruthi Shankar in Bengaluru and Noah Browning and Marc Jones in London; Editing by David Gregorio