* 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 http://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. DAX .GDAXI 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. 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. GVD/EUR
Across the Atlantic, the S&P 500 hit a record high, boosted by waning fears about the coronavirus. An airline stock index .XAL 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 (NYSE:IBM) IBM.N rallied 3.6% after better-than-expected full-year profits, while streaming giant Netflix NFLX.O warned the next few months would be tougher and its stock fell 2.2%. .N
The Dow Jones Industrial Average .DJI rose 60.8 points, or 0.21%, to 29,256.84, the S&P 500 .SPX gained 10.69 points, or 0.32%, to 3,331.48 and the Nasdaq Composite .IXIC added 50.71 points, or 0.54%, to 9,421.51.
The pan-European STOXX 600 index .STOXX lost 0.03% and MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.30%. Emerging market stocks .MSCIEF rose 0.65%.
Overnight, the coronavirus developments boosted Shanghai stocks .SSEC from an early 1.4% drop to end higher. Japan's Nikkei .N225 , South Korea's Kospi index .KS11 and Hong Kong's Hang Seng .HSI all rose by more than half a percentage point and Australia's S&P/ASX 200 .AXJO hit a record high.
NO PANIC, CAUTION
With markets generally rising, safe plays such as gold and the Japanese yen were weaker. The dollar .DXY was shuffling toward the highs reached in December against other major currencies. /FRX
"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". dollar index .DXY rose 0.07%, with the euro EUR= down 0.05% to $1.1077.
The Japanese yen weakened 0.04% versus the greenback at 109.94 per dollar, while Sterling GBP= 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. O/R
U.S. crude CLc1 fell 2.33% to $57.02 per barrel and Brent LCOc1 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. US/
"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 US10YT=RR were unchanged in price yielding 1.7691%, from 1.769% late on Tuesday.
Spot gold XAU= dropped 0.1% to $1,556.49 an ounce. U.S. gold futures GCcv1 fell 0.10% to $1,556.40 an ounce. Copper CMCU3 lost 0.88% to $6,105.50 a tonne.
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