GLOBAL MARKETS-European stocks climb as economic data fuels growth hopes

* European shares gain 1.2%, on track for first gain this week

* PMI data in Germany, UK, euro zone gives hope

* Euro falls to seven-week low

* Too early to declare China virus a global emergency -WHO

* Safe haven Japanese yen, gold sold (Releads, add PMI data, updates prices)

By Tom Wilson

LONDON, Jan 24 (Reuters) - European shares on Friday were set to post their first daily gain this week on signs of a recovery ahead for growth, with easing worries over the coronavirus outbreak in China also emboldening investors.

In some of the first glimpses of the health of the region's economy this year, a Purchasing Managers' Index (PMI) survey showed Germany's private sector gaining momentum, with growth in services up and a pullback in manufacturing easing.

PMI figures from Britain, meanwhile, showed the vast services sector returning to growth in January for the first time since August and a downturn in manufacturing slowing.

And while euro zone-wide PMI showed business activity remaining weak there were some signs that the worst may be over.

The broadly positive data helped the Euro STOXX 600 extend an early advance, climbing 1.2% and heading towards its first day of gains this week.

Indexes in Frankfurt and Paris gained 1.4% and 1.2% respectively, while London advanced 1.6%.

Among individual shares, Bayer gained 2.3%, after a report on a possible out-of-court settlement at a U.S. jury trial over allegations that its weed-killer Roundup causes cancer.

Wall Street futures also pointed to slim gains.

"Sentiment among manufacturers is improving rapidly, meaning that expectations for a 2020 recovery are increasing," ING economist Bert Colijn said of the euro zone.

"We are expecting growth to very gradually pick up over the course of the year."

CORONAVIRUS: NOT YET A GLOBAL EMERGENCY?

The data boosted a positive vibe in markets, where fears over the outbreak of a deadly coronavirus in China abated slightly after the World Health Organization designated it an emergency for China, but not yet for the rest of the world.

The virus has killed 26 people and infected more than 800. Chinese health authorities fear the infection rate could accelerate as hundreds of millions of people travel over the week-long Lunar New Year holiday, which began on Friday.

MSCI's world equity index, which tracks shares in 49 countries, gained 0.2%, with resilience among markets in Asia helping.

There, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1% amid slow trade for the Chinese holiday. Financial markets in mainland China, Taiwan and South Korea were closed.

"Markets are waiting to see whether or not (the coronavirus) has a material impact on growth, and that's hard to judge at the moment," said Neil Wilson, chief analyst at Market.com.

Markets have reacted more calmly to the outbreak than was the case during the SARS epidemic in 2003, Wilson said, possibly because of greater information about its spread.

SAFE HAVENS FALL

As investors made bets on riskier assets, safe havens such as the Japanese yen and gold stepped back.

The yen fell a sliver to 109.60 yen against the dollar, off two-week highs of 109.26 touched on Thursday. Gold fell 0.3%.

Still, underscoring the grave economic risks posed by any deepening of the crisis, the National Australia Bank estimated China's GDP growth for the first quarter could be hit by around 1 percentage point by the virus outbreak.

The Lunar New Year is a time of heavy consumption on travel, gifts and entertainment.

"The impact on Chinese growth could be significant given the outbreak coincides with the Chinese New Year," said Tapas Strickland, NAB's director of economics in Sydney.

In currency markets, the euro tumbled to a seven-week low against the dollar as the PMI data added to a broader market conviction that European Central Bank policymakers will maintain a loose monetary policy for the near future.

The single currency was last at $1.1033.

The European Central Bank had on Thursday left its policy rates unchanged, though President Christine Lagarde struck a slightly more dovish tone than some had expected.

The British pound retreated, after initially strengthening, as some investors still expected an interest rate cut next week even though business surveys pointed to a post-election bounce in the UK economy.

Sterling rose as much as 0.3% to $1.3180 before erasing those gains. It was last down 0.3% at $1.3125.

Against a basket of six major currencies, the dollar was flat, trading off two-week lows hit on Thursday.

(Reporting by Tom Wilson; Editing by Simon Cameron-Moore and Richard Pullin)