NEW YORK (Reuters) - World stock markets advanced on Friday, posting double-digit gains for the quarter, as economic reports showing U.S. consumer spending and sentiment still on the rise helped buoy stock prices and undercut the desire to hold bonds.
U.S. government debt prices fell, marking the end of a tumultuous first quarter for Treasuries, marked by their worst three-month period since the fourth quarter of 2010.
But stocks on Wall Street ended their strongest quarter in more than two years. Investors flocked to consumer-oriented shares after data showed U.S. consumer spending rose by the most in seven months in February and consumer confidence rebounded to its highest in more than a year in March.
The S&P consumer staples sector index .GSPS rose 0.7 percent and the S&P consumer discretionary sector index .GSPD added 0.4 percent.
"You're seeing a bit of sector rotation," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. "That underscores investors are still constructive on the equity market."
European shares rose following a 3-day drop as bargain hunters scooped up cyclical mining and auto shares after a deal on the region's rescue fund.
The FTSEurofirst 300 .FTEU3 index of top European shares closed up 0.9 percent at 1,069.03, its best first quarter in six years. The pan-regional index rose 6.8 percent for the quarter.
MSCI's all-country world equity index .MIWD00000PUS added 0.6 percent, pushing its gain up more than 11 percent so far this year for its best quarterly performance since the third quarter of 2010.
The Dow Jones industrial average .DJI gained 66.22 points, or 0.50 percent, to 13,212.04. The S&P 500 Index .SPX gained 5.19 points, or 0.37 percent, to 1,408.47. The Nasdaq Composite .IXIC dipped 3.79 points, or 0.12 percent, to 3,091.57.
An afternoon sell-off in the bond market reversed early gains notched in response to the data, which challenged the view U.S. economic growth was accelerating. It reinforced the perception that the Federal Reserve could undertake further measures to stimulate the economy and job growth.
"Since the end of 2011 we've seen the market get spooked by stronger economic data," said Robert Tipp, chief investment strategist for Prudential Fixed Income, where he helps oversee $240 billion in assets under management.
"Those concerns were elevated at the Fed's last policy meeting when the market was unable to glean any hint the Fed would continue their aggressive open market operations in the second half of the year," Tipp said.
The benchmark 10-year U.S. Treasury note fell 15/32 in price to yield 2.21 percent. The 30-year U.S. Treasury bond was down 40/32, yielding 3.34 percent.
The euro rallied against the dollar and the yen after budget cuts in Spain boosted hopes the country could stick to an austerity path, though mixed U.S. data capped some gains.
Spain presented a budget that aims to save more than 27 billion euros in 2012 through spending cuts and revenue increases. Also in Europe, euro zone finance ministers agreed to raise their financial firewall to contain the region's debt crisis.
"We have a lot of conflicting data points, a lot of conflicting news," said Camilla Sutton, chief currency strategist at Scotia Capital. "There's no catalyst to break things out of month-long ranges."
The euro rose 0.3 percent against the dollar to $1.3334 and gained 0.8 percent to 110.48 yen.
The greenback seesawed against the yen, rising 0.5 percent to 82.83 yen.
Crude oil rose after three losing sessions, with support from a weaker dollar and expectations of tight gasoline supplies in the United States, the world's largest oil consumer. <O/R>
Front-month Brent crude futures settled up 49 cents at $122.88 a barrel, recovering from their sharpest daily fall in more than three weeks.
U.S. crude futures settled up 24 cents at $103.02 a barrel after their biggest 2-day slide since mid-December.
Fears of supply disruption in the Middle East underpinned oil, but gains were capped by concerns that some Western nations will release oil stocks, increasing supply and tempering prices. There is also a focus on the untamed euro zone crisis.
"Prices are still very range-bound," said Amrita Sen at Barclays in London. "Overall prices are within a range, still constrained by fears on the upside of a strategic petroleum release and on the downside by the strong fundamentals and geopolitical concerns."
Bullion was set to end the quarter up 6.6 percent, but was well below prices of other precious metals. Platinum was set to rise almost 17 percent while silver was headed for a 16 percent gain in the quarter.
For the day, spot gold rose 0.47 percent to $1,668.77 an ounce. U.S. gold futures for June delivery raced higher than spot prices, settling at $1,671.90 an ounce.
Additional reporting by John Stonestreet in London; editing by Bernadette Baum, Jeffrey Benkoe and Dan Grebler