GLOBAL MARKETS-Selling abates after virus causes worst day since October

* European shares and S&P futures steady after worst day since Oct Asia falls again but finishes off lows

* Safe-haven demand strong after risk assets sell off

* Yen begins to claw higher again, yuan licks wounds

* Oil down 18% from year's highs

*

* World FX rates in 2020 http://tmsnrt.rs/2egbfVh

By Marc Jones

LONDON, Jan 28 (Reuters) - European markets stabilised on Tuesday after worries about the economic fallout of China's spreading coronavirus set off the worst global rout in months.

A flat STOXX 600 and higher Wall Street futures indicated some relief after Monday's biggest drop in world stocks since October.

Chinese markets are closed all week, but a 0.5% overnight drop in Tokyo's Nikkei was more modest than Monday's thumping. Many of Asia's other markets that were open had rallied.

Even so, the mood remained jittery. The death toll from the virus topped 100 overnight and Germany confirmed its first case. A number of governments and multinational companies were curbing travel.

Japan's safe-haven yen began to climb again after a pause overnight. China's yuan dropped towards three-week lows and the euro fell to almost a three-year trough against the Swiss franc.

Oil prices were wobbling after a three-month low of $58.50 a barrel drew talk of an OPEC output cut. In bond markets the demand for safety pushed U.S Treasury yields under 1.60% for the first time since October.

"We saw a bit of a bounce back overnight in the most high- volume liquid assets like the S&P 500 futures, but it's hard to find anything to hang your hat on because we still need to assess the risks," said Saxo Bank's head of FX strategy, John Hardy.

China has taken the precaution of extending its Lunar New Year holiday to Feb. 2 nationally and to Feb. 9 for Shanghai. Its largest steelmaking city, Tangshan, suspended all public transit in an effort to contain the virus.

Chinese President Xi Jinping also met with the chief of the World Health Organisation, Tedros Adhanom Ghebreyesus, in Beijing, and discussed ways to combat the outbreak, including "possible alternatives" to evacuations, a WHO spokesman said.

"The virus is a devil and we cannot let the devil hide," state television quoted Xi as saying.

WILD CARD

MSCI's broadest index of Asia-Pacific shares outside Japan ended down 0.8%. Japan's Nikkei, which was down nearly 1% at one point, closed 0.5% lower. Australian shares ended 1.3% down and South Korea's Kospi index fell 3%.

The iShares China Large-Cap ETF sank 4% on Monday. It is down about 10% since Jan. 17, when worries began to grow about the virus, which emerged in the central Chinese city of Wuhan.

"The wild card is not the fatality rate, but how infectious the Wuhan virus is," Citi economists wrote in a note. "The economic impact will depend on how successfully this outbreak is contained."

Moreover, as companies report potential business disruptions and governments advise against unnecessary travel to and within China, analysts are trying to compute how much the disruption could damage growth.

APPLE EYED

Apple is due to report results later. Its plan to ramp up iPhone production by 10% in the first half of the year will be the top question as the coronavirus spreads across major markets like China.

"... The interesting part will be how much the virus and the contamination efforts of the Chinese government will hamper supply chains and growth, and that is really hard to grasp in the short term," said Christian Lenk, an interest rates strategist at DZ Bank.

Market gauges of long-term inflation expectations fell to their lowest in a month and a half in the euro zone at 1.2640%.

The yield on the benchmark German Bund was flat at -0.38% , not far from the three-month low -0.391% it fell to on Monday. Yields across other European markets, including Italy and Spain, were also broadly stable.

In the United States, a two-day Federal Reserve meeting starts later. The market consensus is that the Fed will keep interest rates unchanged at 1.5% to 1.75%, but attention will be on what it thinks about the virus effects.

Chinese authorities may also have more limited room to stimulate the economy than it had during the 2002-03 outbreak of the Severe Acute Respiratory Syndrome (SARS) virus, another reason investors were jittery.

Treasury 10-year note yields were off lows after falling as low as 1.598%, the lowest since Oct. 10. Fed fund futures have rallied in recent days as investors priced in more risk of a rate cut later this year. Futures now imply around 35 basis points of easing by year-end.

JPMorgan said it has not yet altered its forex forecasts, though it was taking profits on "bullish" EUR/USD positions and remains "considerably long" on Swiss francs, which benefit from safe-haven demand.

Short build-up in the Aussie was another risk hedge. The currency was last flat at $0.6760 after two days of losses. The euro was up at $1.1022.

In commodities, Brent crude was off 12 cents a barrel at $59.20. U.S. crude fell 2 cents to $53.12. Brent is now down 18% from a spike caused by the U.S. killing of Iran's top military commander at the start of the year.

Spot gold weaker at $1,579.28 an ounce, after climbing to its highest since 2013 on Monday.

"(Gold) could reach $1,600, but would be more around the $1,570-$1,590 levels as we need to get more information," said John Sharma, an economist at National Australia Bank (NAB). "There are a lot of unknown variables around the virus."

(Additional reporting by Swati Pandey and Wayne Cole in Sydney and Asha Sistla in Bengaluru; editing by Larry King)