* Risk assets slump in Asia, led by losses in Chinese stocks
* Worries about China virus grow before Lunar New Year
* Oil drops on threat from virus, rise in supply
* European stocks fall, ECB policy review in focus
By Marc Jones
LONDON, Jan 23 (Reuters) - World shares fell on Thursday, led by the biggest tumble in Chinese stocks in more than eight months, as concern mounted about a new coronavirus outbreak in China.
With millions of Chinese preparing to travel for the Lunar New Year, the potential for the disease to spread, along with the tendency of traders to reduce their exposure before holidays, left markets struggling.
Safe options such as Japan's yen and government bonds rose, Wall Street looked set to follow Europe and Asia lower and commodity markets saw both oil and metals prices buckle.
"Ultimately, the coronavirus is a slow-burning but important story for markets that is likely to last for months rather than just a few days," said TD Securities' European head of currency strategy, Ned Rumpeltin. "And the natural go-to currencies when there are headlines like these are the yen and the Swiss franc."
The Swiss franc had skipped to a near three-year high against the euro overnight but paused in Europe as the focus turned to the day's big central bank action.
Norway had already left its interest rates unchanged, but the main event was the European Central Bank's first meeting of the year, where it is expected to give some pointers on its first formal policy review in 17 years.
Economists expect the review to take most of the year and will span topics from the bank's inflation target to digital money and the fight against climate change.
New ECB President Christine Lagarde has floated radical ideas such as the central bank buying bonds that fund environmental improvements, though the limited number of them at the moment could prove a hurdle.
"Quite a lot has happened in the last 17 years," Rumpeltin added. "They are due for a rethink."
Asia has been gripped by the coronavirus outbreak.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 1%. Chinese shares dropped 3.1%, the biggest daily decline since May, when U.S. President Donald Trump's threats of additional tariffs on Chinese goods rocked financial markets.
Hong Kong shares ended down 1.5% and Japan's Nikkei index slid 1%.
Among major currencies, the Chinese yuan fell to a two-week low, on course for its worst week since August. The Japanese yen climbed 0.2% to secure a third day of gains as the dollar went flat.
Gold and U.S. Treasuries also rose as China blocked travel to and from Wuhan, the city where the coronavirus outbreak originated. Gold later reversed in Europe as part of a wider fall in metals markets that left copper at a 6-week low and walloped 2% off nickel.
Deaths in China from the coronavirus rose to 17 on Wednesday, with nearly 600 cases confirmed.
"The coronavirus has introduced some caution," said Michael McCarthy, chief market strategist at CMC Markets in Sydney. "There is no reason to expect a global pandemic now, but there is some repricing in financial markets."
Reporting by Marc Jones, editing by Larry King and Timothy Heritage