GLOBAL MARKETS-Stocks hover near 7-week lows as virus fears hit China markets after holiday

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

* Coronavirus death toll in China rises to 361

* China central bank injects $174 bln of liquidity on Monday

* Economists lower growth forecasts for Chinese economy

* European shares rise on Brexit relief

By Ritvik Carvalho

LONDON, Feb 3 (Reuters) - A gauge of global stocks hovered near seven-week lows on Monday as Asian stocks plunged on their first trading day after a long break, amid fears the coronavirus epidemic would hit Chinese demand.

Markets elsewhere showed signs of rebounding, however, after a selloff last week that pushed global stocks into negative territory for the year.

Shares opened higher in Europe on relief that the UK had finally exited the European Union, although fears about the coronavirus kept buying in check.

Futures for U.S. stocks were higher and oil pared early losses, while the safe-haven Japanese yen and gold stepped back from recent highs.

Aiming to head off any panic, China's government took steps to shore up an economy hit by travel curbs and business shut-downs.

But Chinese shares were deep in the red, with the blue-chip index down 7.8% to a 4-1/2 month low.

The benchmark Shanghai Composite index lost $420 billion in value and the yuan opened at its weakest level of 2020, sliding past 7 per dollar.

MSCI's All Country World Index, which tracks shares in 47 countries, was down 0.2% on the day, touching its lowest since Dec. 16. The index is down 1.3% this year.

Having risen 0.2% in early deals, the pan-European STOXX 600 index was flat by midday in London. Blue-chip British stocks added 0.35%, helped by a fall in sterling.

The pound slid 1.1% to $1.3047 after British Prime Minister Boris Johnson set out tough terms for European Union talks, rekindling fears Britain would reach the end of an 11-month transition period without agreeing a trade deal.

While China's losses were heavy, they were mostly a product of selling pressure that had built up over the Lunar New Year break, not a reflection of new fears among investors.

Story continues

"The market seems to have reacted quite reasonably," said Pala Asset Management portfolio manager David Nietlispach.

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"There is no panic and no selloff of securities that are unrelated to the coronavirus. The government interventions have been so heavy, though, that you will see an impact on the global economy."

Asian markets more broadly continued to sell off. MSCI's broadest index of Asia-Pacific shares outside Japan was down for an eighth straight day, falling 0.85% at 527.61 points, its lowest since early December.

Japan's Nikkei dropped 1% to the lowest since November and Australia's benchmark index ended down 1.3%.

"The impact in Chinese equity markets has been in line with what futures were suggesting, so the market has taken the slump in its stride," said Rodrigo Catril, Sydney-based strategist at National Australia Bank. "There was also some cushion from the new measures."

A total of 361 people have died in China from the coronavirus. The first death outside the mainland was reported on Sunday in the Philippines.

GLOBAL SLOWDOWN

In a bid to soften the blow to China's economy, the country's central bank cut reverse repo rates by 10 basis points and injected 1.2 trillion yuan ($173.8 billion) of liquidity into the markets on Monday.

Beijing also said it would help companies that produce vital goods resume work as soon as possible, state broadcaster CCTV reported.

But a raft of global economists, including Citigroup, Nomura and JPMorgan, downgraded their forecasts for China's economic growth.

"Given that we're 10 years into a global equity bull market, the potential for the virus to trigger a significant market correction is much greater now than it has been during previous epidemics," said Neil Shearing, chief economist at Capital Economics in a note to clients.

As Chinese markets opened after the 10-day break, Shanghai copper hit its daily selling limit as did Shanghai crude oil while yields on the country's 30-year government bonds traded in the interbank market were down 18.5 basis points.

Dalian soymeal plunged 4.1% while Dalian iron ore hit limit down as steel prices fell.

In currencies, the yen fell but remained near a 3-1/2 week high against the dollar at 108.50. The euro was 0.25% lower at $1.1066.

The dollar index, which measures the U.S. currency against a basket of major currencies, was 0.25% higher at 97.638.

Gold, which posted its best month in five in January, slipped as much as 1% to $1,574.5 an ounce. Yields on U.S. debt came off lows.

Oil prices recovered some losses after Reuters reported that OPEC and its allies are considering a further cut to oil output.

Brent crude was last down 0.3% at $56.44 a barrel after falling more than $1 at one stage. U.S. crude gained 0.4% to $51.78. (Reporting by Ritvik Carvalho; Additional reporting by Marc Jones in London and Swati Pandey in Sydney; Editing by Catherine Evans)

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