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| - Stock markets experienced exceptional volatility on Monday as investors tried to pinpoint the likely cost of the novel coronavirus crisis for world business. European stocks kicked off the day with sharp gains, but then abruptly switched direction when the European Union's disease control agency raised its risk level for the novel coronavirus. But strength on Wall Street -- which rebounded from very sharp losses last week to post gains of over two percent Monday -- helped European markets emerge from the red after governments and central banks said they would step in if needed to soften the blow to the economy. Frankfurt still posted moderate losses by the closing bell, while Paris eked out a small gain. London added more than one percent, helped by a weakening pound against the euro as the EU and Britain kicked off Brexit trade deal talks. "Concerns about the spreading of the coronavirus has been a key catalyst of the market uneasiness, though expectations are rising that we may see a coordinated response from global central banks, including the Fed," said analysts at Charles Schwab. What market strength there was came "on a mixture of bargain hunting and, perhaps more importantly, on hopes of major stimulus from central banks", said Russ Mould, investment director at AJ Bell. "Markets typically rise on interest rate cuts." Some analysts warned, however, that investors should not place too much hope in central banks, and any stock market recovery could therefore be fragile. The European Central Bank's key rate is already negative, severely reducing any scope for further easing, they said. "There could be a limited amount that the central banks could do in terms of stimulus", said Richard Hunter, head of markets at Interactive Investor. Some investors are still betting on a Fed interest rate cut at its March 17-18 policy meeting after governor Jerome Powell made a rare unscheduled statement on the outbreak, which he said "poses evolving risks to economic activity". Powell said the central bank was "closely monitoring developments and their implications for the economic outlook", adding: "We will use our tools and act as appropriate to support the economy." US rate-cut expectations weighed on the dollar against the euro, with traders saying that the coronavirus outbreak was turning the European currency into a refuge investment. The Bank of England said in a statement Monday that it was "working closely" with "international partners to ensure all necessary steps are taken to protect financial and monetary stability". London's FTSE slumped 11.1 percent last week as the coronavirus spread outside China. Analysts warned of further turmoil on trading floors as governments struggle to contain the disease, which has now killed more than 3,000 people and infected almost 90,000. "Markets face significant uncertainty in the short term and remain at high risk of more downside given the unknowns around COVID-19," said Shane Oliver, a global investment strategist at AMP Capital Investors. Traders remain worried the disease "will disrupt economic activity more deeply and for longer than had been expected a week or so ago". In Asian trade Monday, Shanghai led gainers, rising 3.2 percent after dropping more than five percent last week, while Hong Kong closed up 0.6 percent after a loss of around four percent. Tokyo rose 1.0 percent. The gains came on hopes for government stimulus after an index of Chinese manufacturing activity fell to its lowest level on record in February as factories around the country were shuttered. Global government bond markets, meanwhile, benefited from investor money seeking a safe home, as well as expectations of softer monetary policy worldwide. London - FTSE 100: UP 1.1 percent at 6,654.89 points (close) Frankfurt - DAX 30: DOWN 0.3 percent at 11,857.87 (close) Paris - CAC 40: UP 0.4 percent at 5,333.52 (close) EURO STOXX 50: UP 0.3 percent at 3,338.83 New York - Dow: UP 2.5 percent at 26,030.16 Tokyo - Nikkei 225: UP 1.0 percent at 21,344.08 (close) Hong Kong - Hang Seng: UP 0.6 percent at 26,291.68 (close) Shanghai - Composite: UP 3.2 percent at 2,970.93 (close) Dollar/yen: UP at 108.03 from 107.89 on Friday Euro/dollar: UP at $1.1151 from $1.1026 Pound/dollar: DOWN at $1.2773 from $1.2823 Euro/pound: UP at 87.31 pence from 85.99 pence Brent Crude: UP 2.3 percent at $50.83 per barrel West Texas Intermediate: UP 2.8 percent at $46.02 burs-jh/wai
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