(Refiles to alter description of State Street strategist in fifth paragraph.)
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By Elizabeth Howcroft
LONDON, June 26 (Reuters) - Markets showed signs of optimism on Friday, with European shares gaining for a second consecutive day, oil prices rising and the dollar falling, despite a record number of new COVID-19 infections in the United States.
Coronavirus cases rose across the United States by at least 39,818 on Thursday, the largest one-day increase yet. The governor of Texas temporarily halted the state's reopening on Thursday as infections and hospitalisations surged.
But European shares were undeterred, with the Stoxx 600 up 1.2% at 1030 GMT, erasing some losses from earlier in the week . The index is set to end the week down 0.5%, its smallest weekly change in five months. London's FTSE 100 was up around 1.5%.
The MSCI world equity index, which tracks shares in 49 countries, was up 0.4%, extending gains from late on Thursday.
"Even though we continue to see some pretty scary virus numbers coming out of the U.S., it's not really dented sentiment – not to any sustained degree at least," said Timothy Graf, head of macro strategy for EMEA at State Street Global Markets.
Graf said that recent downward corrections of market optimism have had little follow-through.
The possibility of a second coronavirus wave and renewed lockdowns has limited market impact because if lockdown measures resume then markets expect this to raise the likelihood of more fiscal support for economies, he said.
"There is a disconnect between what you feel should be the case looking at virus numbers and equities and riskier currencies holding up relatively well and volatility receding, but at the same time we've never seen a policy response like this, not in the last 80 years at least," Graf said.
Having risen between 0500 and 0700 GMT, the dollar fell in London, reaching 97.325 against a basket of currencies by 1030 GMT and on track to end the week down around 0.4%.
The riskier New Zealand dollar was up 0.2%, having spent most of June unchanged from its level before the coronavirus crisis for markets peaked in March.
The euro gained versus the U.S. dollar and is on track for its biggest weekly rise in three weeks after the European Central Bank reaffirmed its dovish stance in the minutes of its policy meeting.
The euro zone is "probably past" the worst of the economic crisis caused by the pandemic, European Central Bank President Christine Lagarde said on Friday, while urging authorities to prepare for a possible second wave.
Oil prices also rose, extending gains on optimism about a recovery in fuel demand worldwide, despite signs of a revival in U.S. crude production.
U.S. West Texas Intermediate crude futures gained 20 cents, or 0.5%, to $38.92. Brent crude futures rose 31 cents, or 0.8%, to $41.36.
Demand for safe euro zone government debt was little changed, with Germany's 10-year Bund yield edging up from recent one-month lows at -0.464%.
The yield on benchmark 10-year Treasuries was steady at 0.6725%. Gold edged up slightly to $1,763.65 an ounce. US/ GOL/
S&P 500 futures pointed to a slightly bullish U.S. stock market open, up 1%.
Investors have poured $2.6 billion into Treasury inflation-protected securities (TIPS) in the week to Wednesday, Bank of America said, the largest amount ever.
Credit Suisse changed its position on global equities to "neutral", from "overweight", saying that it was taking profits after the recent rally, but kept its overweight positions in credit markets.
"The upcoming earnings season, a recent uptick in coronavirus infection numbers and political developments in the USA create a challenging backdrop for financial markets going into the summer," said Michael Strobaek, Credit Suisse's chief investment officer.
Reporting by Elizabeth Howcroft; editing by Mark Heinrich, Larry King