* 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
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> gained 71.90 points, or 0.59 percent, to 12,157.92. The Standard & Poor's 500 <.SPX> rose 8.82 points, or 0.68 percent, to 1,306.36. The Nasdaq Composite <.IXIC> added 29.38 points, or 1.09 percent, to 2,727.68.
The MSCI All-Country index <.MIWD00000PUS> 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> 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
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
U.S. crude