By Marc Jones

LONDON, March 31 (Reuters) -Share markets pushed for a fifth straight day of gains on Friday and bonds headed for their best month since 2008, as a record monthly drop in the euro zone's inflation rate raised investors' expectations for similar U.S. data later in the day.

With an action-packed first quarter also drawing to a close world stocks were consolidating a 6% year-to-date rise. Government bonds have gained as much as 5%, gold is 8% higher, while oil is down and the dollar .DXY has barely budged.

Also making headlines on Friday, was Donald Trump'sindictment for paying hush money to porn star Stormy Daniels, making him the first former U.S. president - and potential challanger in the next election - to face criminal charges.

The euro zoneinflation numbers showed consumer prices rising 6.9% in March after an 8.5% increase in February, representing the sharpest deceleration since Eurostat started collecting data in 1991.

"The brakes are on the economy, but slowly," said Hans Peterson, the global head of asset allocation at SEB investment management. "So down the road we will have to see what the central banks do."

Europe's main stock markets .STOXX and Wall Street futures ESc1 were all up around 0.3% after Asian equities .MIAPJ0000PUS overnight notched up their first March gain in four years.

That part of the world has been lifted by China casting off its COVID restrictions. MSCI Asia ex-Japan has added 3.6% so far this year after surging 12% in the final quarter of 2022.

Japan's Nikkei .N225 also jumped 1% on Friday，as inflation data for the capital Tokyo highlighted broadening price pressures. .T

China and Hong Kong's Hang Seng .CSI300, .HSI rose modestly too after China's PMI data showed that the recovery in the services sector was gathering pace and manufacturing activity expanded faster than expected.

Investors were also still cheering a major revamp plan by internet giant Alibaba 9988.HK which has seen its shares make a whopping 17% this week and been taken as a sign that Beijing's regulatory crackdown might be over for now.

Fellow Chinese e-commerce firm JD.com Inc 9618.HK jumped 6% too after it announced similar plans to spin off its property and industrial units. .SS

CENTRAL FOCUS

Wall Street was set for another modest rise after Thursday saw gains for tech stocks but falls in regional bank shares after Treasury Secretary Janet Yellen said banking regulation and supervisory rules need to be re-examined in the wake of recent turmoil.

Markets will be shifting their focus back to inflation and the outlook for Fed interest rate hikes on hopes that the banking troubles stay largely contained.

U.S. personal consumption expenditures (PCE) inflation index, which is closely tracked by the Federal Reserve, is expected to ease to 0.4% in February from January, when it rose 0.6%.

However, there is still an expectation that banks will now be more cautious about lending, which would also impact the Fed.

"The underlying source of these (banking market) stresses, which have to do with interest rates, inverted yield curves, etc., is still with us, so these stress factors have not gone away. I suspect we will see bouts of volatility in markets during 2023," said Herald van der Linde, head of equity strategy for Asia at HSBC.

"If we look at upside until the end of the year, I think China could do very well," van der Linde added.

Fed funds futures are still split on whether the Federal Reserve will hike or not at the next policy meeting in May, while pricing in a rate cut by November. That compared with an overwhelming bet on a 25 basis point hike a month ago before the banking volatility started. FEDWATCH

U.S. Treasuries have had a blockbuster month, with the two-year yields US2YT=RR down a whopping 68 basis points to 4.1120%, the biggest monthly decline since the 2008 financial crash. Ten-year yields US10YT=RR were 35 bps lower this month to 3.5602%, confounding those thinking they would rise.

"Everyone that was short bonds was trounced," said Ted Pincus at Switzerland-based hedge fund Mangart Capital, referring to those who had bet on bond yields rising further.

"That's the problem when you have these kinds of rapid moves. Stop losses exacerbate the pain."

OFF TO THE RACES

Moves in foreign exchange markets were muted on Friday, but the U.S. dollar was on course for a 2.7% monthly drop against six of its peers albeit only a 1.1% one for the quarter. FRX/

The euro EUR=EBS, which hit a one-week high against the dollar overnight on sticky German inflation data, dipped back under $1.09 again after the euro zone data but was still set for a 3% monthly rise.

Japan's yen JPY=EBS, which has benefitted from safe-haven flows,is headed for a 2.5% gain for the month, while emerging market currencies have mostly risen too.

Oil prices seesawed on Friday, and were down more than 3% for the month and 8% for Q1. U.S. crude CLc1 futures were flat at $74.40 per barrel, while Brent crude LCOc2 futures slipped 0.1% to $78.52 per barrel.

Gold XAU= hovered around the highest since April last year, up more than 8% for the month to $1,980.20 per ounce. GOL/

Additional reporting by Stella Qiu in Sydney
Editing by Gareth Jones

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