Governments around the world moved to contain the spread of a possible flu pandemic on Monday, as a virus that has killed 103 people in Mexico spread to the United States and may have reached as far as New Zealand.

Fearing another setback for the fragile world economy, markets reacted nervously to the swine flu outbreak, which has prompted the World Health Organization (WHO) to activate its 24-hour 'war room' command centre.

The yen and dollar rose while Mexico's peso fell, although Mexican Finance Minister Agustin Carstens tried to reassure markets, saying the impact on the economy would be 'transitory'.

Shares fell in Asia and Europe, with travel and leisure stocks such as Hong Kong's Cathay Pacific Airways and British Airways down sharply, whereas makers of drugs and vaccines, such as Roche, were higher.

No deaths have occurred outside Mexico from the new strain of swine flu but 20 cases have been identified in the United States and six in Canada. Possible cases are being checked as far afield as Europe, Israel and New Zealand.

Countries stepped up surveillance at airports and ports, using thermal cameras and sensors to identify people with fever.

Japan's cabinet held a special meeting and said it would prioritise production of a new vaccine. Health authorities across Asia tried to reassure nationals, saying they had sufficient stockpiles of anti-flu drugs to handle an outbreak.

The European Commission called an urgent meeting of health ministers.

The new flu strain, a mixture of various swine, bird and human viruses, poses the biggest risk of a large-scale pandemic since avian flu surfaced in 1997, killing several hundred people. A 1968 'Hong Kong' flu pandemic killed about 1 million people globally.

The United States declared a public health emergency on Sunday. Although most cases outside Mexico were relatively mild, a top official at the Centers for Disease Control and Prevention said she feared there might be US fatalities.

The WHO has declared the flu a 'public health emergency of international concern' that could become a pandemic, or global outbreak of a serious disease. That could cost trillions of dollars to a world economy already in its worst crisis in decades.

A top virologist who helped fight the last two major global health scares -- SARS in 2003 and bird flu which re-emerged the same year -- worried that Asia could again bear the brunt of a new pandemic.

'We are counting down to a pandemic,' said Guan Yi, a virology professor at the University of Hong Kong who helped trace the deadly outbreak of SARS to the civet cat.

'I think the spread of this virus in humans cannot possibly be contained within a short time ... there are already cases in almost every region. The picture is changing every moment.'    

Investors in Asia are all the more aware of the potential damage after the outbreak of SARS in Hong Kong six years ago hobbled the city and regional economy, as well as flare-ups of bird flu in the past few years.

At the centre of the outbreak this time is Mexico, a major exporter of oil, coffee and factory goods. Late on Sunday, Health Minister Jose Angel Cordova said the flu had killed 103 people in the country and about 400 people were admitted to hospital.

A glimmer of hope was that most patients had recovered.

Schools have been closed in several Mexican states this week in order to slow the spread of the virus.  Many in the capital spent the weekend hunkered at home or wore blue surgical face masks handed out by truckloads of soldiers to venture out onto strangely hushed streets. The city government considered halting public transport.

The countries affected by the flu so far:

MEXICO: The number of confirmed and suspected swine flu deaths has hit 103, according to Mex