* Global stocks up 3.9 pct 1st qtr, US equities up 6.4 pct
* Oil, grains jump, seen feeding inflation in future
* Crude up 24 pct for quarter -- best-performing asset
* Euro firms as ECB sticks to rate hike plan
(Updates with markets' close)
By Barani Krishnan
NEW YORK, March 31 (Reuters) - Stocks on major world
markets posted a third straight quarter of gains on Thursday
and commodity prices also surged, feeding inflationary pressure
that could boost equities further.
Global stocks, as measured by the MSCI All-Country World
Index <.MIWD00000PUS>, finished the day up 0.03 percent after
hitting a three-week high earlier. It rose 3.9 percent in the
first quarter, after the 22 percent gained in two previous
quarters.
On Wall Street, the Dow Jones industrial average closed
down 0.23 percent. But it ended the quarter up 6.4 percent,
adding to the 18 percent rise in the previous six months.
In currency markets, the euro notched a quarterly gain of
5.9 percent against the dollar -- its first gain in two
quarters -- as the European Central Bank stuck to a plan to
raise interest rates despite the financial mess in eurozone
countries such as Ireland, Portugal and Greece.
In commodities trading, prices of wheat <3Wc1>, corn <3Cc1>
and soybeans <3Sc1> -- raw materials for bread, syrup and
animal feed -- rose as much as 5.0 percent each on Thursday.
They shot up after a U.S. government report showing stockpiles
of grains at much lower levels than expected.
Oil prices rose as Middle Eastern protests and Libya's
conflict kept threats to supply in focus.
U.S. crude oil <CLc1> finished up 2.4 percent at $106.72 a
a barrel, a 2-1/2 year high. Brent crude <LCOc1> ended up 1.9
percent on the day, and 24 percent for the quarter, the
period's best-performing major asset.
Analysts said they expected price pressure from such
commodities to channel into equities and boost shares of
natural resource producers.
"To see another couple of percent moves in stocks going
into the end of the second quarter will not surprise us at
all," said Oliver Pursche, president of Gary Goldberg Financial
Services, which manages over $500 million in Suffern, New
York.
"We think commodity-related stocks such as Mosaic <MOS.N>,
Cliff Natural Resources <CLF.N> and Deere <DE.N> will
particularly do well, although we could see more market
volatility as the QE2 nears its June expiry," Pursche said,
referring to the Federal Reserve's $600 billion stimulus
effort.
Despite strong quarterly gains, Wall Street has recorded
some of the year's lightest trading over the last week as
investors played it safe by riding on winning stocks. The
latest session saw investors reluctant to make big bets before
Friday's monthly employment report. For more see []
The Dow Jones industrial average <> ended down 30.88
points, or 0.25 percent, at 12,319.73. The Standard & Poor's
500 Index <.SPX> lost 2.43 points, or 0.18 percent, at
1,325.83. The Nasdaq Composite Index <> was up 4.28
points, or 0.15 percent, at 2,781.07.
The Russell small-cap index <.SML> ended at a record high,
after gaining 0.5 percent on the day and 7.4 percent for the
quarter.
"I think at this point, the market deserves the bullish
benefit of the doubt," said Adam Sarhan at New York-based
financial advisory Sarhan Capital.
"You have a nuclear threat in Japan, instability in
oil-producing countries, debt panic in Ireland and other
periphery countries in Europe. Yet the market doesn't come
down."
ECB MULLS RATE HIKE
The euro rose on expectations the ECB will raise interest
rates in April to curb inflation, despite the region's
festering debt crisis. [] [] []
The yield premium investors demanded to hold Portuguese
bonds rather than benchmark German bonds rose to 508 basis
points, 12 bps wider on the day, as the country's 10-year
yields <PT10YT=TWEB> hit 8.476 percent.
Portugal's budget deficit reached 8.6 percent of gross
domestic product in 2010, above a target of 7.3 percent agreed
with the EU.
The euro traded above 1.416 to the dollar by 4:24 p.m. EDT
(2024 GMT), paring gains after comments by a regional Federal
Reserve president indicating a possible U.S. rate hike later in
the year.
Minneapolis Fed President Narayana Kocherlakota said U.S.
short-term interest rates may need to rise 75 basis points in
late 2011. []
The yen fell to a 10-month low of 117.90 versus the euro
and hit a three-week trough of 83.21 against the U.S. dollar as
expectations grew that Japan would lag the euro zone and U.S.
central banks in raising rates. So far this year, the euro has
risen nearly 8.0 percent against the yen. []
In the bond market, U.S. Treasuries prices initially rose
after data showing weekly jobless claims fell less than
expected. There were also some flight-to-safety bid as
Portuguese government bond yields rose. []
But by the end of the day, prices finished lower.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Asset returns in Q1 2011 graphic
http://r.reuters.com/wur78r
Key events in Q1 2011 timeline
http://r.reuters.com/saj68r
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(Additional reporting by Ellen Freilich and Caroline
Valetkevitch in New York; and Dominic Lau in London; Editing by
Kenneth Barry and Dan Grebler)
