GLOBAL MARKETS-World shares fly, gold and silver at record highs

* MSCI world index reclaims level before Japan disasters

* Portugal bailout likely after PM resigns, yields soar

* Euro wobbles, then heads higher on rate outlook

* Gold and silver hit record highs
(Updates prices, adds comment, drops London from dateline)

By Rodrigo Campos

NEW YORK, March 24 (Reuters) – Global stocks rallied on
Thursday, up for a sixth consecutive session and recouping
losses stemming from Japan’s natural disasters, while the euro
jumped as its rate outlook took center stage.

Gold and silver hit record highs as investors snapped up
precious metals for their safe-haven and inflation hedge
appeal. Spot gold (XAU=: Quote, Profile, Research) rose to a record $1,447.40 an ounce,
while silver climbed to a 31-year peak at $38.13.

A downgrade of most Spanish banks’ debt by rating agency
Moody’s and rising borrowing costs for Portugal weighed on the
single currency earlier, but it recovered on a split in the
interest-rate outlooks for the euro zone and United States.
[USD/]

U.S. oil edged near its recent intraday high as
U.N.-mandated air strikes hit Libya for a fifth night, but
failed to stop Muammar Gaddafi’s tanks from shelling
rebel-held towns. [ID:nLDE72N006]

Stores in Tokyo were running out of bottled water after
radiation from a damaged nuclear complex briefly made tap
water unsafe for infants, while more nations curbed imports of
Japanese food. [ID:nL3E7EN3MI]

STOCKS BET ON ECONOMIC RECOVERY

Equity markets gained on bets on a continued economic
recovery that were coupled with the end of an upbeat quarter.
Light volumes have lately underscored caution, however.

“We are at the quarter end, and the fact that we’ve had a
good earnings season, continued expansion of the economy and
also relatively cheap valuation (in stocks) looking forward is
helping the market,” said Peter Kenny, managing director at
Knight Equity Markets in New Jersey.

The Dow Jones industrial average (.DJI: Quote, Profile, Research) gained 71.90
points, or 0.59 percent, to 12,157.92. The Standard & Poor’s
500 (.SPX: Quote, Profile, Research) rose 8.82 points, or 0.68 percent, to 1,306.36. The
Nasdaq Composite (.IXIC: Quote, Profile, Research) added 29.38 points, or 1.09 percent,
to 2,727.68.

The MSCI All-Country index (.MIWD00000PUS: Quote, Profile, Research) climbed 0.9
percent, rising for six successive trading days for a gain of
more than 4 percent.

After Moody’s downgrade pressured bank stocks and the
overall market at the open, the FTSEurofirst 300 (.FTEU3: Quote, Profile, Research)
recovered to rise nearly 1 percent to hit two-week highs, led
by gains in two major British retailers.

Surveys on Thursday showed economic recovery continued in
March, shrugging off Japan’s disaster, although Middle East
turmoil is pushing prices higher.[ID:nLDE72N0KH]

The outlook for stocks may be changing as more defensive
positions are being advised.

“We are recommending that investors shift to a more
cautious approach to markets than the risk-embracing positions
we have recommended since the recovery got under way two years
ago,” said Larry Kantor, head of research at Barclays Capital,
in a client note.

“We generally favor developed country over emerging equity
markets, particularly the U.S., where policy is still easing,
immediate growth prospects are best and risks are relatively
low.”
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Reuters polls on world stock markets [ID:nLDE72K1HU] Q+A-What's next for Portugal? [ID:nLDE72N00Q] European sovereign debt crisis: http://r.reuters.com/hyb65p Japan earthquake in graphics http://r.reuters.com/fyh58r U.S. crude futures chart: http://link.reuters.com/maq68r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

EU IN DISARRAY

The premium investors demand to hold Portuguese debt
rather than benchmark German Bunds hit euro lifetime highs.

Prime Minister Jose Socrates resigned on Wednesday and
warned of grave consequences for the country after parliament
rejected his government’s latest austerity measures aimed at
avoiding a bailout.

His resignation increased expectations Lisbon will seek
international aid and threw into disarray a European Union
summit expected to address the region’s debt crisis.
[ID:nLDE72N0AM]

Cabinet Minister Pedro Silva Pereira said “the government
will continue to fight against the possibility of resorting to
foreign aid.”

The euro (EUR=EBS: Quote, Profile, Research) was up 0.8 percent against the dollar
at $1.4196, after earlier falling to a low of $1.4053 on
trading platform EBS.

Still, the road ahead may be hard for the single currency.

“We think that no agreement at the EU summit on the
bailout facilities should erode euro support further in the
near term.” said Valentin Marinov, currency analyst at
Citigroup.

The yen was steady against the dollar at 80.90 yen (JPY=: Quote, Profile, Research),
although market players are still wary Japan may intervene to
sell the currency if the dollar breaches 80 yen.

U.S. crude (CLc1: Quote, Profile, Research) rose above $106 per barrel and Brent
(LCOc1: Quote, Profile, Research) was little changed, still supported by concern over
instability in Libya and the Middle East and by rising equity
prices. [O/R]
(Reporting and writing by Rodrigo Campos; Additional
reporting by Robert Gibbons, Angela Moon, Wanfeng Zhou;
Editing by Jan Paschal)

GLOBAL MARKETS-World shares fly, gold and silver at record highs