* Europe’s STOXX 600 follows Wall Street to record high
* Focus on how fast China companies can go back to work
* Dollar at four-month high over euro on US economy performance
* Sprint wins approval for T-Mobile merger
* Fed’s Powell and ECB’s Lagarde speaking later
* World FX rates in 2020 tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Feb 11 (Reuters) - European equity markets pushed to record highs on Tuesday as China’s top medical advisor fuelled hopes the coronavirus epidemic may be close to peaking.
China’s factories were struggling to re-open after an extended break and analysts were continuing to calculate the likely economic damage, but the mood remained more optimistic.
Althought the death toll in mainland China climbed past 1,000 overnight, the number of new confirmed cases fell. Zhong Nanshan, an epidemiologist who helped combat the SARS epidemic in 2003, said the situation in some provinces was already improving.
“The peak time may be reached at ... maybe middle or late this month,” Zhong told Reuters, followed by a plateau and decrease, Zhong said, basing the forecast on mathematical modelling, recent events and government action.
The pan-European STOXX 600 index rose as much as 0.7% to a record high of 427.46 points. Basic resources stocks led the gains, rising 1.7%, as commodity prices recovered from the slowdown in Chinese consumption of raw metals and energy.
“There are some hopes that the peak of virus may be on the horizon, but we are still quite cautious,” said TD Securities’ European Head of Currency Strategy Ned Rumpeltin. “We are still pretty far from the all clear ... and we just don’t know what the macroeconomic impacts are going to be.”
Wall Street was pointing up again, before one of Federal Reserve Chairman Jerome Powell’s twice-yearly updates to Congress European Central Bank President Christine Lagarde was also due to speak at 1600 GMT.
The focus remained on the coronavirus spread. China now has more than 42,000 confirmed cases in China; 319 cases have been recorded in 24 other countries, according to World Health Organization and Chinese health officials.
Chinese factories have been slow to reopen after an extended Lunar New Year break, leading analysts at JPMorgan to again downgrade forecasts for growth this quarter.
“The coronavirus outbreak completely changed the dynamics of the Chinese economy,” they said in a note.
They assumed the contagion would peak in March and factories would slowly resume opening this month. In that case, growth would slow to around a 1% annualised pace in the first quarter, before rebounding to 9.3% in the second.
Should the contagion not peak until April, the economy could contract in the first quarter, with a rebound spread over the second and third quarters, the JPMorgan analysts said.
The WHO warned the spread of the virus among people who had not been to China could be “the spark that becomes a bigger fire”. Even so, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9%, with Shanghai blue chips ahead by 0.9%.
Japan’s Nikkei was closed for a holiday, although Nikkei futures traded up 0.8%.
The relative outperformance of the U.S. economy is keeping the dollar well-supported, with the euro slipping to a four-month low at $1.0900. The British pound was last at $1.2925 after reassuring GDP data tugged it from two-month trough of $1.2870.
Against a basket of currencies, the dollar was at its highest since mid-October at 98.876 and heading for its sixth day of gains in the last seven against the Japanese yen, which benefits from being a safe haven of its own..
Markets are now pricing in almost 40 basis points of U.S. rate cuts this year to cope with coronavirus damage. The Treasury yield curve slightly inverted to reflect the danger of recession.
Fed Chair Powell is expected at his testimony later to reiterate that the U.S. economy is doing well but that rates can stay low given the current low inflation environment.
Risk aversion initially helped lift gold to its highest for a week, but the strength of the dollar pulled it back 0.25% to $1,569 per ounce.
Oil prices rose after weeks of decline as traders waited to see how demand in China might fare and whether OPEC could agree to trim supplies.
Brent crude futures gained 90 cents to $54.15 a barrel. U.S. crude rose 85 cents to $50.41.
Reporting by Marc Jones, editing by Larry King