* European shares slump at open
* Yen, Treasury notes in demand
* Many Asian markets closed for new year holiday
* MSCI All Country World Index hits two-week low
By Ritvik Carvalho
LONDON, Jan 27 (Reuters) - World shares fell to their lowest in two weeks on Monday as worries grew about the economic impact of China's spreading coronavirus with demand spiking for safe-haven assets such as Japanese yen and Treasury notes.
The death toll from the coronavirus outbreak in China rose to 81 and the virus spread to more than 10 countries, including France, Japan and the United States. Some health experts questioned whether China can contain the epidemic.
The MSCI All-Country World Index, which tracks shares across 47 countries, was down 0.42% to its lowest since Jan. 13.
In Europe, stock markets slumped at the start of trading, tracking their counterparts in Asia. The pan-European STOXX 600 index fell 1.4% to its lowest level since Jan. 14.
Shares of mining companies slumped 3.1%, dragged down by their exposure to China, the biggest decline among the major European subsectors.
"The coronavirus is an economic and financial shock. The extent of that shock still needs to be assessed, but it could provide the spark for an arguably long-overdue adjustment in the capital markets," Marc Chandler, chief market strategist at Bannockburn Securities, told clients.
In Asia, Japan's Nikkei average slid 2.0%, the biggest one-day fall in five months. A Tokyo-listed China proxy, ChinaAMC CSI 300 index ETF, fell 2.2%. Many markets in Asia were closed for the lunar new year holiday.
U.S. S&P 500 mini futures were last down 0.9%, after falling 1.3% in early Asian trade.
The ability of the coronavirus to spread is getting stronger and infections could continue to rise, China's National Health Commission said on Sunday. Nearly 2,800 people globally have been infected and 81 in China killed by the disease.
China announced it will extend the week-long new year holiday by three days to Feb. 2 and schools will return from their break later than usual. Chinese-ruled Hong Kong said it would ban entry to people who have visited Hubei province in the past 14 days.
"With most Asian markets closed, fast-money investors are buying risk-off hedges like Treasuries and selling the Nikkei," said Masahiko Loo, portfolio manager at Alliance Bernstein.
"I think this would continue this week, until China markets resume trading next week and the coronavirus outbreak subsides."
MSCI's broadest index of Asia-Pacific shares outside Japan was off 0.45%, although markets in China, Hong Kong, Taiwan, South Korea, Singapore and Australia were closed on Monday.
All three major Wall Street indexes closed on Friday, with the S&P 500 seeing its biggest one-day percentage drop in over three months.
The S&P 500 lost 0.9%, the Dow Jones Industrial Average 0.6% and the Nasdaq Composite 0.9% after the Centers for Disease Control and Prevention confirmed a second case of the virus on U.S. soil.
U.S. Treasury prices advanced, pushing down yields. The benchmark 10-year note's yield fell to a three-and-half-month trough of 1.627%.
Elsewhere in bonds, the Italian 10-year yield fell to a three-month low Monday after right-wing leader Matteo Salvini failed in his bid to overturn decades of leftist rule in the northern region of Emilia-Romagna on Sunday.
In the currency market, the Japanese yen strengthened as much as 0.5% to 108.73 yen per dollar, its two-and-a-half-week high.
The euro last stood at $1.1031 to the dollar, up from its eight-week low of $1.1019 on Friday.
The offshore yuan dropped more than 0.5% to 6.9776 against the dollar, its weakest since Jan. 6.
The coronavirus outbreak also pressured oil and other commodity prices.
U.S. West Texas Intermediate crude futures plummeted 3.8% to a three-and-a-half-month low of $52.15. Brent shed more than 3% to a three-month low of $58.68 per barrel.
"Investors will react quickly to any sign of negativity and this is no exception as China announces that the issue has become an emergency. This could keep oil prices fragile until the coronavirus shows signs of slowing down," said Mihir Kapadia, chief executive at Sun Global Investments.
Spot gold rose as much as 1.0% to $1,585.80 per ounce, the highest level since Jan. 8, as the coronavirus outbreak pushed up demand for the safe-haven metal.
Reporting by Ritvik Carvalho; additional reporting by Sujata Rao in London and Tomo Uetake in Tokyo; editing by Larry King