GLOBAL MARKETS-Stocks on worst run in 18-months amid global COVID-19 surge

(Updates ahead of start of U.S. open)

* World share index sees first 5-day fall since Feb 2020

* Dollar rises broadly but Japanese yen edges up

* Oil prices fall more than 2% after OPEC+ resolves spat

* Government bond yields burrow lower amid COVID angst

By Marc Jones

LONDON, July 19 (Reuters) - Risk-aversion ruled on Monday as
a surge in worldwide coronavirus cases drove down bond yields
and left stocks facing their longest losing streak since the
pandemic first hit global markets 18 months ago.

Summer markets were suddenly stormy. Europe's STOXX 600
saw its worst morning in two months and London's FTSE
fell over 2% as Britain's 'freedom day' when it lifted
COVID restrictions was overshadowed by its double-jabbed health
minister contracting the virus.

Asia had seen Japan's Nikkei and Hong Kong's Hang
Seng drop 1.3% overnight too. Cases hit an 11-month high
at the weekend in Singapore. Thailand had its highest single-day
increase since the pandemic began and Sydney's construction
workers were told to down tools after cases rose there as well.

Wall Street futures down nearly 1% although it
was good news for those holding safe-haven government bonds
or the dollar, which climbed to a more than
three-month high.

Natwest's Global Head of Desk Strategy, John Briggs, said
the chances of broader lockdowns being needed again were growing
and also China's economy was slowing, meaning a recent surge in
commodity prices could be peaking although oil is now expensive
enough to be a weight on many economies.

"Where all this comes out of the wash for me is that with
this narrative gaining traction, it is clearly more bullish for
the U.S. dollar," Briggs said.

He said that if COVID-19 cases rise again, factors to
consider included which countries have the highest vaccination
rates, their appetite for social restrictions and their fiscal
appetite.

"The U.S. comes out on top of all these," Briggs added. "We
are in a period of renewed US exceptionalism ... So all this is
bullish for the USD."

In Europe's stock markets, COVID angst saw travel and
leisure stocks fall to their lowest level of the
year. Shares of cruiseship operator Carnival, airlines
easyJet and British Airways-owner IAG, and the
UK's Restaurant Group and Cineworld cinema chain
all fell between 5% and 6%.

It wasn't just COVID crushing the mood either. China's
supersized tech trio Baidu, Alibaba and Tencent had sank 2.5% -
3% overnight after a Shanghai court at the weekend posted a list
of "typical unfair competition cases".

PERMANENTLY CHANGED?

Oil prices sank more than 2% after the OPEC group of
producing nations overcame a recent spat and agreed to boost
output in a hastily arranged meeting on Sunday.

Brent crude was down $1.70 at a five-week low of
$71.85 a barrel. U.S. crude fell a similar amount to
$70.59 a barrel.

Global economic growth is beginning to show signs of fatigue
as many countries, particularly in Asia, struggle to curb the
highly contagious Delta variant of the novel coronavirus and
have been forced into some form of lockdown.

Investors are also worried about the spectre of elevated
inflation, which the market has long feared.

Economists at Bank of America downgraded their forecast for
U.S. economic growth this year to 6.5%, from 7% previously, but
maintained their 5.5% forecast for next year.

"As for inflation, the bad news is it's likely to remain
elevated near term," they said in a note, pointing to their
latest proprietary inflation meter, which remains high.

"The good news is ... we are likely near the peak, at least
for the next few months, as base effects are less favourable and
shortage pressures rotate away from goods towards services."

In bond markets, the move to safe-haven assets meant the
recent fall in yields continued. Germany’s 10-year bond yield
was at its lowest since late March at -0.369% ahead
of an ECB meeting this week. U.S. Treasury yields slipped to
1.265% and have fallen for 11 of the last 15 trading sessions.

Action in the currency market lifted the dollar 0.3%
against a basket of major currencies to 92.976.

But it failed to make ground against the Japanese yen - the
dollar/yen currency pair traded below the 110 yen per dollar
mark at 109.85, leaving the yen 0.2% higher on the day.

Britain's sterling hit a three-month low against the dollar
at $1.3706 after its health minister Sajid Javid
had tested positive for COVID-19. That forced Prime Minister
Boris Johnson and finance minister Rishi Sunak to quarantine on
Sunday.

"Despite rising vaccination rates, a return to pre-corona
normality seems questionable," Ulrich Leuchtmann, head of FX and
commodity research at Commerzbank, wrote in a research note.

(Additional reporting by Karin Strohecker; Editing by Timothy
Heritage and Edmund Blair)