* Coronavirus cases rise, Asian, European stocks slip
* World stocks still set for best week since June
* Major currencies steady, oil firm but has not recovered
* Payrolls expected to show U.S. labour market strength
* World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Feb 7 (Reuters) - Nagging coronavirus worries took a swipe at world markets on Friday, though that wasn't going to stand in the way of the best week for stocks since June and the strongest for the dollar since August.
Europe's trading day began with stocks down and safe-haven government bonds up, a pattern that had been set in Asia where the death toll from the virus in China has more than doubled in less than a week. stood at 638 on Friday, 636 in China and two elsewhere and it was also revealed that one of the first doctors to raise the alarm about the virus had died from it at a hospital in Wuhan, the outbreak's epicentre. week up until this point, though, has been one long rebound that has lifted MSCI's main world stocks index 3 percent .MIWD00000PUS and almost back to the record highs it began the year with.
Thanks to a $400 billion wipeout on Monday, Shanghai is poised for its worst week in eight months. But the other Asian indexes are ahead and the pan-European FTSEurofirst is heading for its best week since late 2016.
"We are not that nervous, actually we are increasing our risk allocation," said SEB investment management's global head of asset allocation Hans Peterson, adding the risk of a massive worldwide epidemic seemed to have dropped.
"We look more at this moment at the macro data in the U.S. which is really very good... and we presume we will get substantial support from central banks like we did in China on Monday."
There were other areas of focus aside from the virus worries for traders.
The euro fell to its lowest since October in early European trading after German industrial output recorded its biggest decline in a decade and strong U.S. employment numbers on Thursday had primed the dollar for monthly payrolls later.
In Asian trade, the yen halted a slide that has it set for its worst week in 18 months, leaving the currency sitting just above a two-week low at 109.89 per dollar. FRX/
The Australian dollar, often seen as a proxy for China, weakened 0.5% to $0.6699 AUD=D3 after the Reserve Bank of Australia slashed growth forecasts in its quarterly economic outlook, blaming its bushfires and the coronavirus.
The Aussie was still on track for its first weekly gain this year, whereas Singapore dollar SGD= and Thai baht THB= have been trampled in a rush from emerging market currencies into majors. EMRG/FRX
OIL TOILS
Much is unknown about the coronavirus, including its lethality and transmission routes. The World Health Organization has said it is too early to call a peak in the outbreak.
China's aggressive response, dubbed a "people's war for epidemic prevention" by President Xi, has seen Beijing pump billions of dollars into the money market to try and stabilise confidence. owing to much greater exposure to Chinese demand and less access to the benefits of monetary stimulus, commodity prices have been more sensitive to conditions on the ground.
Oil and metal prices fell hard as the coronavirus outbreak gained pace and have been slow to recover.
Brent crude LCOc1 was a touch firmer on Friday at $55.17 per barrel, but is heading for its fifth back-to-back weekly drop having lost over 16% this year.
A rally in copper - often seen as a barometer of global economic health because of its wide industrial use - stalled at $5,695 per tonne though it has been its strongest week since the start of December. MET/L
"We think that demand could come back strongly as opposed to gradually in Q2 2020," said Commonwealth Bank commodities analyst Vivek Dhar. "But the risk in the near term is that (Chinese) provinces take longer to return to work in order to contain the spread of the virus."