By Herbert Lash
NEW YORK (Reuters) - World markets steadied on Friday after a volatile week driven by speculation over shifts in U.S. monetary policy, with equities holding near break-even, the euro up slightly against the dollar and crude oil rising on fear of supply disruptions over Crimea.
Stocks on Wall Street closed lower as investors exercised caution heading into the weekend after the benchmark S&P 500 index earlier hit a record intra-day high. Equities initially were boosted by Moscow's assertion that no other Ukrainian region would be subject to intervention.
But Brent crude rose to just below $107 a barrel as U.S. sanctions against Russia, the world's second-largest oil exporter, kept fears of a supply disruption alive.
President Vladimir Putin signed laws completing Russia's annexation of Crimea on Friday, and Brent posted a fourth weekly loss.
Despite Friday's dip, the Dow and S&P 500 posted their best weekly performance since mid-February, though some analysts said equities are vulnerable to U.S.-Russian tensions.
The Dow Jones industrial average fell 28.35 points, or 0.17 percent, to 16,302.7. The S&P 500 lost 5.61 points, or 0.3 percent, to 1,866.4, and the Nasdaq Composite dropped 42.498 points, or 0.98 percent, to 4,276.788.
The Dow rose 1.5 percent for the week, the S&P gained 1.4 percent and Nasdaq added 0.7 percent.
"I don't know that if there's enough momentum behind the market given the macro forces" to forecast further gains in the near-term, said Dan Morris, global investment strategist at TIAA-CREF. "We're expecting something more flattish for the next quarter or so."
Companies tied to the pace of economic growth were among the biggest gainers, with energy and industrial rallying. Joy Global Inc jumped 2.5 percent to $56.51 while Halliburton Co was up 1.2 percent to $58.06.
European shares logged their biggest weekly gain in a month, supported by a rally in basic resources stocks and some positive technical buying signals.
The European basic resources index rose 1.1 percent after the Chinese premier said on Thursday investment and construction plans will accelerate to ensure domestic demand expands at a stable rate, a sign China will support its economy.
MSCI's all-country world equity index traded at break-even, paring earlier gains from European markets. The euro zone's blue-chip Euro STOXX 50 index rose 0.25 percent after a major options expiry, and the pan-regional FTSEurofirst 300 closed up 0.1 percent at 1,307.24.
"The elements for the continuation of the current rally are on the table. The market is not cheap but not extremely expensive either and economic growth is going to be decent," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.
"If you believe in the scenario of a gradual economic upturn, you should play the sectors that benefit from that and invest in stocks such as basic resources and banks," he said.
A Reuters poll on Thursday forecast European stocks will extend their rally in 2014, fuelled by a long-awaited rebound in corporate profits as the region's economy picks up and global investors shift from emerging markets to Europe.
New Fed Chair Janet Yellen surprised investors mid-week by hinting interest rates might rise earlier than expected, while U.S. economic data on Thursday was mixed.
Yellen was likely just repeating the views of private analysts and investors when she said the central bank could raise interest rates six months after ending a bond-buying program, St. Louis Fed President James Bullard said on Friday.
"On the 'considerable period' being six months, the surveys that I had seen from the private sector had that kind of number pencilled in," Bullard said during a lunch with journalists.
The dollar's three-day rally sputtered as the euro rose against the greenback after data showed a record euro zone current account surplus in January.
The dollar fell 0.12 percent against a basket of major currencies. The dollar later fell 0.17 percent against the safe-haven Swiss franc and 0.22 percent against the yen.
The euro hit an intraday high of $1.38011, and was up 0.12 percent against the greenback.
German benchmark debt futures rose 11 ticks to settle at 142.51.
Longer-dated U.S. Treasuries prices rose as investors evaluated the possibility the Fed will increase benchmark rates sooner than had been expected.
Benchmark 10-year notes rose 8/32 in price to yield 2.7444 percent.
Brent crude rose 47 cents to settle at $106.92 a barrel. U.S. crude for May delivery, which became the front-month contract on Friday, settled up 56 cents at $99.46 a barrel.
(Additional reporting by Simon Jessop, Reporting by Herbert Lash; Editing by Chris Reese, Chizu Nomiyama and Leslie Adler)