By Marc Jones
LONDON (Reuters) - World stocks fell for the first time in four days on Thursday, the final day of a roller-coaster first quarter that has hammered the dollar and the pound but has proven the best in decades for gold and bonds.
European markets had a groggy morning with shares down 1 percent, the dollar hovering near a seven-week low versus the euro and oil volatile again after an extremely wild V-shaped ride so far this year.
Analysts were cautious about drawing too many conclusions amid the normal end-of-quarter choppiness, but there was a sense that the underlying currents of the past few months were still running strong.
Oil was stuck at $39 a barrel on record U.S. stockpiles and China was put on a downgrade warning by S&P, while euro zone inflation data showed it remains non-existent, underscoring just why the European Central Bank is cranking up its stimulus efforts.
This quarter "has all been about the three C's. Commodities, China and central banks," said Aberdeen Asset Management investment committee member Kevin Daly.
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When oil hit $27 a barrel in mid-January there were "pretty dark" predictions for the global economy, he said, but the rebound in crude, China and ECB stimulus and the Federal Reserve cooling rate hike expectations had all bolstered confidence.
The ECB's two rounds of additional aid this year is a large part of the reason why German government bonds are set for their best quarter since the height of the euro zone crisis in late 2011.
Bund yields were down another couple of ticks ahead of U.S. trading. They have shed nearly 50 basis points since the start of the year to leave them within touching distance of zero again. U.S. treasuries have surged too.
In the currency market, the dollar remained weak as the latest sell-off continued following this week's cautious comments on the global outlook from the head of the Federal Reserve, Janet Yellen.
The euro pushed up to $1.1365 and the yen hovered at 112.36 to the greenback to leave the six currency dollar index on track for its biggest monthly fall since April 2015 and largest quarterly drop in five years. [FRX/]
"Obviously Tuesday was very interesting from Janet Yellen and it had the desired effect," said Charles Schwab managing director Kully Samra.
BLIZZARD OF DATA
Sterling has also taken a pounding this year as concerns about a potential British exit, or 'Brexit', from the European Union, have grown.
It barely budged on Thursday but has seen its biggest quarterly tumble in 6-1/2 years against the euro and on a trade-weighted basis, although on the flip side, March has been its best month in almost a year against the dollar.
The U.S. currency's recent weakness has also been a boon to the Australian and New Zealand dollars, which have both soared to nine-month highs, and it has also boosted Wall Street, which is at its highest level of the year.
It is expected to dip back in line with Europe later when it resumes. Traders are bracing for blizzard of data too, including jobless claims figures that will set the tone for Friday's closely watched monthly payrolls figures.
Overnight, MSCI's broadest index of Asia-Pacific shares outside Japan finish at its highest since early December as emerging markets continued to capitalise on the commodity rebound and the dollar's decline.
This year's turbulant start left MSCI's benchmark EM equity index down 14 percent by the time it bottomed on Jan. 21 and Bond market selling drove government bond spreads - a rough reflection of borrowing costs - up 18 percent.
But fast forward 2-1/2 months and EM stocks are up 20 percent. Currencies from the Russian rouble to the Brazilian real have surged and struggling parts of Africa have some of the best-performing bonds in the world.
"The snap-back (rally) has happened very quickly, but it always happens like that," said Allianz Global Investors portfolio manager Shahzad Hasan.
GOLD SHINES BRIGHTEST
Asia has been carved in two though. Japan's Nikkei sagged 0.7 percent on Thursday to an 11 percent quarterly loss, having been slammed by the 7 percent surge in the yen against the dollar.
Shanghai shares have been an even bigger loser, having dropped about 15 percent since the start of the year, notwithstanding a gradual rebound since mid-January.
At the opposite end of the spectrum, safe-haven gold has been the big winner of 2016 so far.
It ticked up to $1,232 an ounce and has jumped a whopping 16 percent this quarter, its best run in nearly 30 years.
Certain Industrial metals have been red-hot too. Copper is up 2.5 percent, while tin and zinc have soared 15 and 10 percent respectively.
"It is difficult to get bearish on gold at this stage given that the Fed has made it quite clear that it is reluctant to raise rates," said INTL FCStone analyst Edward Meir.
"As a result, the dollar is not rallying on constructive macro releases, and we have to suspect that its weaker tone will limit any substantial declines in gold for the time being."
(Additional reporting by A. Ananthalakshmi in Singapore, Editing by Gareth Jones)