* Crude oil falls, Goldman Sachs advises taking profits
* US stocks off; Alcoa to report after market's close
* Rate rise expectations send Bund yield above 3.5 pct
* US dollar firmer after US government shutdown avoided
(Adds details, comment, updates prices)
By Wanfeng Zhou
NEW YORK, April 11 (Reuters) - Crude oil prices fell sharply on Monday on concerns that recent high prices could erode demand and threaten economic recovery, while the U.S. dollar firmed slightly after the U.S. federal government averted a shutdown late Friday.
Brent and U.S. crude oil prices fell early when the African Union said Libyan leader Muammar Gaddafi had accepted a road map to end the civil war, including an immediate ceasefire, though rebels said any settlement would require Gaddafi step down. [ID:nLDE7390JP]
But analysts were skeptical about the peace deal, and even if an end to the civil war were in sight, it will be some time before Libyan exports return to pre-conflict levels.
Investment bank Goldman Sachs told clients there is a strong chance commodity prices may reverse, recommending they take profits. [ID:nN11303064]
Brent crude oil for May
The U.S. dollar firmed against the euro after the U.S. Congress on Friday reached a last-minute federal 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 sharly against the euro on Friday continuing its downtrend of the past four months. For the month of April, the dollar was still down about 2.0 percent.
On Monday the euro
"The euro's drop today is nothing more than white noise and the pullback should prove shallow," said Jessica Hoversen, foreign exchange and fixed income analyst at MF Global in New York.
Hoversen said the dollar's negative tone should remain in place as long as the U.S. Federal Reserve keeps interest rates low and while central banks abroad, namely the European Central Bank and Bank of England, move closer to more normal borrowing costs.
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
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.
U.S. STOCKS LOWER FOR THIRD DAY
U.S. stocks ended lower for a third day, with investors nervously awaiting quarterly earnings to see if last year's profit growth will continue in the face of rising raw material costs.
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> ended up 1.06 points at 12,381.11 but but the benchmark Standard & Poor's 500 Index <.SPX> fell 3.76 points, or 0.28 percent to 1,324.41. The Nasdaq Composite Index <.IXIC> lost 8.91 points, or 0.32 percent to 2,771.51.
World stocks as measured by MSCI <.MIWD00000PUS> were down 0.3 percent, with emerging markets <.MSCIEF> off 0.6 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.
The International Monetary Fund said on Monday it did not believe that rising commodity prices will derail the global economic recovery but warned that inflation will remain elevated for a while.
(Additional reporting by Ryan Vlastelica, Julie Haviv and Gertrude Chavez-Dreyfuss, Gene Ramos and Robert Gibbons;)