Wires

GLOBAL MARKETS-Stimulus hopes pull stocks back from abyss

Tom Westbrook and Anshuman Daga

* ASX recovers 8% loss for 4.4% gain

* Nikkei, Hang Seng, plunge then pare falls

* U.S. futures turn positive

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

SINGAPORE, March 13 (Reuters) - Stocks plunged on Friday with coronavirus panic selling hitting nearly every asset class - before finding some kind of floor as hopes turned to a U.S. stimulus package.

European and U.S. stock futures traded in positive territory and some of Asia's deepest losses were recovered by the end of a session, in which tight liquidity exaggerated moves.

Japan's Nikkei fell 10% before paring the drop to close 6% lower. Australia's S&P/ASX200 had its wildest trading day on record, falling past 8% before surging in the last minutes of trade to settle 4.4% higher after the close.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 1.3% by mid-afternoon after being down more than 5% during the morning.

The turnaround came as central banks from the United States to Australia pumped liquidity into their financial systems and as hopes grew that U.S. Democrats and Republicans could pass a stimulus package on Friday.

It was not clear if the late market moves signalled a recovery in the dire sentiment that has wiped some $14 trillion from world stocks in a month and had Asian markets in freefall at the open.

While there was no firm explanation from investors on just what prompted the late comeback, some believe the plunge may have run its course for now.

"The prevailing market overreaction has more than priced potential negative impacts to global economic activity," Krishna Kumar, a portfolio manager at Eastspring Investments, said in a note.

"Based on the current information, we do not see the recent COVID-19 and/or oil price declines as permanent longer-term issues for the companies in the fund," he said.

By late afternoon, Hong Kong's Hang Seng was down 3.5% and Korea's Kospi - which had busted through circuitbreakers earlier in the session - had recouped losses to sit 3.7% in the red.

Gold and oil had steadied, but the bond market still bore the scars of the morning's widespread plunge after the Dow Jones posted its worst drop since the 1987 Black Monday crash.

In the somewhat calmer currency markets, the dollar held its ground as investors nervous about systemic risks drove demand for the world's reserve currency.

Majors stabilised after furious dollar buying overnight, with the euro finding footing around $1.1200 and the Aussie recovering to $0.6300.

Emerging market currencies were punished: the won and baht dropped as far 1% and the rupiah 2%.

FALLING KNIVES

The plunge, as the coronavirus pandemic spreads, gathered pace after U.S. President Donald Trump spooked investors with a move to restrict travel from Europe, and after the European Central Bank disappointed markets by holding back on rate cuts.

In a televised address late on Wednesday, Trump imposed restrictions on travel from Europe to the United States, shocking investors and travellers.

Traders were disappointed after hoping to see broader measures to fight the spread of the virus and blunt its expected blow to economic growth.

"Government bureaucracy simply has not kept pace with the nature of the outbreak and market expectations," said Tai Hui, Chief Asia Market Strategist, J.P. Morgan Asset Management.

"We need to see the number of new infections stabilise...we also need to see fiscal and monetary policy support implementation," he said.

"Hence, we are not looking at a specific time or valuation to advise investors to add back equities."

Trade was halted on the S&P 500 overnight after it hit circuit breakers. It fell further when trade resumed, eventually losing 9.5% to close 27% below February's peak.

The VIX volatility index - Wall Street's "fear gauge" - and an equivalent measure of volatility for the Euro Stoxx 50 hit their highest since the 2008 financial crisis.

In commodities, Brent crude rose 1.9% to $33.84 a barrel after falling more than 7% on Thursday. U.S. crude gained 2.4% to $32.26 per barrel. (Editing by Sam Holmes)