MEXICO CITY New swine flu infections were found around the world on Tuesday and the specter of a pandemic hit the travel industry as governments warned people to stay away from Mexico where 149 people have died.
The number of infections in the United States rose to 65, Canada has 13, and new cases were also confirmed in Israel and New Zealand.
The United States, Canada and the European Union are telling people to avoid non-essential travel to Mexico, and Cuba suspended all flights to and from Mexico for 48 hours.
Travel companies were also staying away. Carnival Cruises canceled stops at Mexican ports for three of its ships on Tuesday and Canadian tour operator Transat AT postponed flights to Mexico until June 1.
President Barack Obama asked the U.S. Congress for $1.5 billion to finance its response to the flu threat, and California declared a state of emergency, allowing it to deploy more resources to prevent new infections.
The World Health Organization said a pandemic -- a global outbreak of a serious new illness -- is not yet inevitable but that all countries should prepare for the worst, especially poorer developing nations.
"They really get hit disproportionately hard," said the WHO's acting assistant director-general Dr. Keiji Fukuda.
One of the mysteries of the outbreak is why the virus has killed scores of people in Mexico while the cases outside the country have been relatively mild and no one has died.
Experts say this may be simply a matter of where they have been looking to find it and officials say they expect to find deaths as the disease spreads.
A pandemic could snuff out fragile signs of economic recovery around the world as travel, trade and manufacturing output would all be hit.
The last flu pandemic was in 1968, when "Hong Kong" flu killed about 1 million people around the world.
Seven countries have confirmed cases of the swine flu and a dozen others have suspected infections.
Mexico City is at the center of the outbreak and many residents are staying in their homes while schools, churches, cinemas and restaurants have all been shut down.
Airline share prices declined again on Tuesday on fears that they could experience a sharp drop in traffic.
U.S., European and Asian stock markets all retreated despite positive U.S. consumer confidence data as flu fears and worries about American banks weighed on sentiment.
"Prices remain in a bit of a swoon as market participants fret that a potential influenza pandemic might prove fatal to the frail signs of recovery just beginning to show," said Mike Fitzpatrick, vice president at MF Global in New York.
Oil dropped almost 2 percent to below $50 a barrel and investors cut their exposure to riskier currencies.
The swine flu virus is not caught from eating pig meat products but several countries, led by Russia and China, banned U.S. pork imports. The EU said it has no plans to restrict pig meat products from the United States.
A barrage of travel warnings by foreign governments and travel firms threatened to batter Mexico's tourism industry, a main source of foreign currency for the country.
UK travel firms Thomson Holidays and First Choice decided to repatriate their customers from Mexico and cancel flights bound for Cancun, although most airlines continued to operate their services.
Many private companies took their own precautions, restricting travel to Mexico and other countries with confirmed cases. Honda Motor Co, which like most major auto makers has production facilities in Mexico, has suspended all global business travel until at least May 6.
Experts say that while it is impossible to stop the spread of the disease, efforts to slow its progress could buy crucial time for countries to procure essential drugs.
The WHO's Fukuda said a mild pandemic is possible but he also cautioned that the 1918 "Spanish" flu that killed tens of millions of people emerged from mild beginnings.
Worldwide, seasonal flu kills between 250,000 and 500,000 people in an average year.
In Mexico, people from company directors to couriers wore face masks while airlines checked passengers for flu symptoms.
The government has shut all schools across Mexico until at least May 6. Restaurants, bars, cinemas and even churches in the capital have been closed to limit new infections.
Residents rushed to stock up on food, water and surgical masks but the usually hectic city is otherwise very quiet.
Mexico says the first fatal case that alerted authorities to the strange new virus was in the southern state of Oaxaca but they have not yet found the origin of the outbreak.
(Additional reporting by Maggie Fox in Washington; Jonathan Lynn and Laura Macinnis in Geneva; Helen Popper, Robin Emmott and Mica Rosenberg in Mexico City; Jeff Franks in Havana; Tan Ee Lyn in Hong Kong; and Lincoln Feast in Singapore; Writing by Kieran Murray; Editing by Chris Wilson)