* Crude falls, Goldman Sachs advises taking profits
* US stocks flat; Alcoa to report after market's close
* Rate expectations send Bund yield above 3.5 percent
* Dollar up vs euro after U.S. government shutdown avoided (Adds comment, details, updates prices)
By Wanfeng Zhou
NEW YORK, April 11 (Reuters) - Crude oil prices fell sharply on Monday after surging last week as investors warily eyed efforts to halt Libya's conflict, while the dollar rose against the euro after the U.S. government averted a potential shutdown.
U.S. stocks pared early gains to trade little changed, with investors nervously awaiting companies' quarterly results to see if earnings would be strong enough to spark further gains in equities.
Aluminum maker Alcoa
"There's a question of whether companies can meet the fairly optimistic expectations," said John Carey, portfolio manager at Pioneer Investment Management in Boston, which has about $260 billion in assets under management. "There's potential for disappointment, but if they come in line or above, the market could experience a continued rally."
The Dow Jones industrial average <.DJI> was up 5.11 points, or 0.04 percent, at 12,383.72. The Standard & Poor's 500 Index <.SPX> was down 2.77 points, or 0.21 percent, at 1,325.45. The Nasdaq Composite Index <.IXIC> was off 10.54 points, or 0.38 percent, at 2769.70.
ICE Brent crude for May
The African Union said Muammar Gaddafi had accepted a road map to end the civil war, but forces loyal to him shelled the town of Misrata. A broker said oil also fell on profit-taking. For details, see [ID:nL3E7FB0Z5]
Analysts were skeptical about the peace deal. And even if an end to the civil war is in sight, it will be some time before Libyan exports return to pre-conflict levels.
"Some of Libya's oil fields, which have recently come under attack, have suffered severe damage, which is likely to have a long-lasting negative impact on the country's production profile," said Amrita Sen at Barclays Capital. "We don't believe there is reason to be optimistic even if Gaddafi were to step down, as the power vacuum would be very large."
World stocks as measured by MSCI <.MIWD00000PUS> were down 0.3 percent, with emerging markets <.MSCIEF> off 0.5 percent. European stocks fell, with the FTSEurofirst 300 <.FTEU3> index of top European shares down 0.2 percent.
Although the world economy is fairly robust, investors increasingly expect higher commodity prices to drive up inflation, prompting central banks to tighten monetary policy sooner.
The International Monetary Fund said on Monday it did not believe that rising commodity prices will derail the global economic recovery but warned inflation will remain elevated for a while.
GREENBACK GAINS LIMITED
The dollar rose against the euro after the U.S. Congress on Friday reached a last-minute budget deal that avoided a government shutdown, though traders said the focus on the U.S. debt ceiling debate could limit any gains.
A rebound in the dollar was also overdue after it fell against the euro for the past four months. For the month of April, the dollar was still down more than 2 percent.
The euro
"We're having some sort of relief rally after the U.S. government did not shut down as feared," said David Watt, senior currency strategist at RBC Capital Markets in Toronto.
The yen was off an 11-month low against the euro and a 2-1/2-year trough versus the Australian dollar as another earthquake in Japan led some investors to close riskier bets funded by cheap borrowing in the Japanese currency. [ID:nL3E7FA058]
The strong aftershock in Japan unnerved some investors, driving down copper prices after they earlier reached five-week highs on a weaker dollar and robust imports by top consumer China.
The euro touched its highest against the yen since May 2010
of 123.33 yen
Expectations of another rise in European Central Bank
interest rates by July kept the euro close to recent highs and
pushed euro zone government bond prices lower. German Bund
yields