WASHINGTON - A baby in Texas has died of the H1N1 flu strain, the first confirmed death outside Mexico from the virus, which health officials fear could cause a pandemic as it spread to two more countries.

Nearly a week after the threat emerged in Mexico, where up to 159 people have died, U.S. officials said on Wednesday a 23-month-old child died from the virus in the state that borders Mexico.

They gave no other details on the first death in a country with 65 confirmed cases of swine flu, most of them mild.

Germany reported its first three cases and Austria one, taking to nine the number of countries known to be affected.

France said it would seek on Thursday a European Union ban on all flights to Mexico because of the flu.

The EU, like the United States and Canada, has already advised against nonessential travel to the popular tourist destination.

A Bavarian couple in their 30s, a 22-year-old woman in Hamburg and a 28-year-old Austrian, who was now recovering, had all recently returned from Mexico -- as had all five Britons taken ill with mild symptoms.

The Britons include three new cases confirmed on Wednesday, adults in London and Birmingham and a 12-year-old girl in southwest England.

Cases have also been confirmed in Canada, New Zealand, Israel and Spain.

The World Health Organization said it may raise its pandemic alert level to phase five -- the second highest -- if it were confirmed that infected people in at least two countries were spreading the new disease to other people in a sustained way.

Before the U.S. death was reported, Keiji Fukuda, acting WHO assistant director for health security and environment, said it could be a very mild pandemic, adding, however, that influenza moves in ways we cannot predict.

Stock markets in Asia and Europe rose on Wednesday, partly on optimism the world could be spared a major deadly pandemic.

Considerable market uncertainty remained.

The sentiment is not one of panic but that of caution, said Alex Wong, director with Ample Finance Group in Hong Kong.

There is no indication on how bad the situation may get, so investors are guarded about taking new positions.

MEXICO THE EPICENTRE

The new strain contains DNA from avian, swine and human viruses and appears to have evolved the ability to pass easily from one person to another, unlike most swine H1N1 viruses. It is not caught from eating pig meat products but several countries, led by Russia and China, have banned U.S. pork imports. The EU said it has no plans to follow suit.

Mexican Health Minister Jose Angel Cordova said more than 1,300 people were in hospitals, some of them seriously ill, out of a total of around 2,500 suspected cases.

In the last few days there has been a decline (in cases), he said. The death figures have remained more or less stable.

Victims ranged from children and young adults to middle-aged people and the old, a different pattern to common seasonal flu that mainly kills the elderly and infirm.

The distribution doesn't follow a fixed pattern, Cordova said.

In a sign of how mild many cases outside Mexico have been, New Zealand gave the all-clear on Wednesday for a group of students and a teacher who caught the virus to return to school.

(They) will be able to come out of isolation again, said Deputy Director of Public Health Fran McGrath.

Australia approved tough new powers to detain and disinfect people suspected of carrying swine flu, as authorities awaited test results from 91 suspected cases.

TRAVEL CURBS

Argentina became the second country to ban flights to and from Mexico. Cuba imposed a similar measure earlier in the week.

Carnival Cruise Lines and Royal Caribbean Cruises Ltd said they were temporarily suspending port calls in Mexico. Land-based tour groups were also calling off trips to the area's beaches.

All Mayan ruins and Aztec pyramids, dotted through central and southern Mexico, were closed until further notice.

Mexico City was unusually quiet with schools closed. Many took their children in to work, including a ruling party lawmaker whose children spent the day in Congress.

As suspected cases began to crop up across Central America, El Salvador began sending nurses to check buses of Salvadoran migrants being deported from Mexico for flu-like symptoms.

U.S. Agriculture Secretary Tom Vilsack said pork, soybean and corn prices had fallen in the last two days and criticized what he said were illogical restrictions on pork.

U.S. Trade Representative Ron Kirk praised the Japanese government for publicly stating it would not ban U.S. pork.

We want to make sure that a handful of our trading partners don't take advantage of this legitimate concern over public health and engage in behavior that could also damage the world's economy, Kirk said at a news conference.

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