GENEVA (Reuters) - The World Health Organization said on Wednesday the world is at the brink of a pandemic, raising its threat level as the swine flu virus spread and killed the first person outside of Mexico, a toddler in Texas.
"Influenza pandemics must be taken seriously precisely because of their capacity to spread rapidly to every country in the world," WHO Director General Margaret Chan told a news conference in Geneva as she raised the official alert level to phase 5, the last step before a pandemic.
"The biggest question is this: how severe will the pandemic be, especially now at the start," Chan said. But she added that the world "is better prepared for an influenza pandemic than at any time in history."
Nearly a week after the H1N1 swine flu virus first emerged in California and Texas and was found to have caused dozens of deaths in Mexico, Spain reported the first case in Europe of swine flu in a person who had not been to Mexico, illustrating the danger of person-to-person transmission.
Both U.S. and European officials have said they expect to see swine flu deaths.
Despite worries that a major flu outbreak could hit the struggling global economy, world stocks rallied on Wednesday after the Federal Reserve said the U.S. recession appeared to be easing.
Almost all cases outside Mexico have had mild symptoms, and only a handful have required hospitalization.
"We doubt that the markets will react with the same worry as found during avian flu scares in the past," said Citigroup analyst Tobias Levkovich in New York.
Chan also urged companies who make the drugs to ramp up production. Two antiviral drugs -- Relenza, made by GlaxoSmithKlin and Tamiflu, made by Roche AG and Gilead Sciences Inc. -- have been shown to work against the H1N1 swine flu strain.
Drugmakers have donated millions of doses of their drugs to the WHO. She also alerted governments to be ready to distribute stockpiles of their drugs.
Vaccine makers were on standby to begin making a new vaccine if needed.
In Mexico, where up to 159 people have died from the virus and around 1,300 more are being tested for infection, people struggled with an emergency that has brought normal life virtually to a standstill over the past week.
"I'm depressed. I don't understand where this came from, how it spreads, how long it will last or what it will to the economy," said an elderly woman named Licha, sitting on a Mexico City park bench and wearing a surgical mask.
Germany and Austria reported cases of the illness, bringing the number of affected countries to 9.
Texas officials said a 22-month-old boy had died -- the first confirmed U.S. swine flu death -- while on a family visit from Mexico.
In the Texas border city of Brownsville, where the young Mexican was first diagnosed and many residents have families on both sides of the Rio Grande river border, some residents said they were now reluctant to venture south to Mexico.
"I am extremely concerned because you could die," said Santiago Perez, 18, a student at Pace High School.
About 30 U.S. Marines in southern California on the biggest military base in the United States were quarantined after one was confirmed to have contracted the illness.
President Barack Obama, facing the sudden flu emergency along with his broader drive to pull the United States out of its deep recession, said the Texas death showed it was time to take "utmost precautions."
Kathleen Sebelius, Obama's newly confirmed health secretary, spent her first day in office on a rapid-fire media tour as the administration sought to calm public fears while urging public health vigilance.
"We know that the cases will continue to rise," Sebelius said.
Homeland Security Secretary Janet Napolitano said the Customs and Border Patrol was keeping an eye out for sick travelers, as usual, and had checked 49 people with flu-like symptoms. She said 41 had been cleared of H1N1 infection and eight were still being studied.
"We are preparing for the worst; hoping for the best," Napolitano said. "All of us should be dusting off our business contingency plans, looking at things like telecommuting and the like so that things keep operating."
Many Americans were heeding the warnings, snapping up hand sanitizers, wipes and soap. "I figure it's going to get worse before it gets better, right?" said Kathy Ivcich, 53, a real estate agent in Chicago.
WORRIES FOR MEXICO
Mexico's central bank warned the outbreak could deepen the nation's recession, hurting an economy that already shrank by as much as 8 percent from the previous year in the first quarter.
France said it would seek a European Union ban on flights to Mexico.
The EU, the United States and Canada have advised against non-essential travel to Mexico, a popular tourist destination, with many of the cases linked to travel there.
Many tourists already in Mexico were hurrying to leave, crowding airports and trying to change their tickets.
"We didn't want to get stuck here," said Australian Alex Grinter, who left her beach vacation in the southern state of Oaxaca to get an early flight to Vancouver.
In Mexico City, a metropolis of 20 million, all schools, restaurants, nightclubs and public events have been shut down to try to stop the sickness from spreading.
H1N1 swine flu is seen as the biggest risk since H5N1 avian flu re-emerged in 2003, killing 257 people of 421 infected in 15 countries. In 1968 a "Hong Kong" flu pandemic killed about 1 million people globally, and a 1957 pandemic killed 2 million.
Seasonal flu kills 250,000 to 500,000 people in a normal year, including healthy children in rich countries.
(Reporting by Maggie Fox and Tabassum Zakaria in Washington, Jason Lange, Catherine Bremer Alistair Bell and Helen Popper in Mexico City; Matt Bigg in Atlanta; Writing by Andrew Quinn, editing by Frances Kerry and Todd Eastham)