* China data boosts stocks, oil and metals outlook
* Dollar holds modest gains after Yellen testimony
* Wall Street seen opening higher
By Nigel Stephenson
LONDON, July 16 (Reuters) - Stocks rose in Europe and aluminium hit a 13-month high on Wednesday after China reported economic growth that was slightly stronger than markets had expected.
However, a fall in the Australian dollar, often seen as a proxy for Chinese growth, showed some investors remained cautions about recovery in the world’s second largest economy.
China’s economy expanded at a 7.5 percent annual pace in the second quarter, the statistics bureau said, just beating the 7.4 percent median forecast in a Reuters poll.
The numbers, which also helped push crude oil and some other industrial metals higher, confirmed the economy had stabilised after a shaky start to the year though analysts said the pick-up was largely driven by government stimulus.
The pan-European FTSEurofirst 300 equity index was up 1.1 percent, buoyed in part by mining stocks which strengthened in anticipation of demand from China.
“It confirms the trend we’ve seen from improving PMI data, and is in line with the idea of a pick-up in the global economy. That’s positive for the mining sector,” said James Butterfill, global equity strategist at Coutts.
Wall Street looked set to open higher, with stocks index futures indicating modest gains. The S&P 500 index slipped on Tuesday after Fed Chair Janet Yellen said in congressional testimony that valuations in some sectors “appear to be stretched”.
The data from China, a major importer of metals, also helped push London aluminium close to its highest in 13 months.
MSCI’s broadest index of Asia-Pacific shares outside Japan was flat by 1100 GMT, however, and Tokyo’s Nikkei share average ended 0.1 percent lower as investors took profit on Tuesday’s gains.
The Australian dollar slipped 0.2 percent against the U.S. dollar to $0.9351.
The biggest mover in currency markets was the New Zealand dollar, which dropped 0.8 percent to a low of $0.8690 after benign inflation data that could reduce pressure on the central bank to tighten policy.
The U.S. dollar index, which values the greenback against a basket of currencies, hit its highest in a month, clinging on to modest gains after Fed chief Yellen said interest rates could rise sooner than expected if employment data improved.
“The main driver to the dollar has been Yellen’s less-than-dovish comments,” said Niels Christensen, FX strategist at Nordea. “The Chinese data also has not been able to provide any support to the Australian dollar.”
Sterling inched lower after data showing workers’ pay grew at its slowest rate on record gave the Bank of England pause for thought about when to raise interest rates.
The pound was last at $1.7126, down less than 0.1 percent on the day, having hit $1.7192 on Tuesday after a surprise jump in inflation.
Brent crude climbed above $106 a barrel after the China data. It hit a three-month low of $104.39 on Tuesday.
“The market is quite euphoric on Chinese economic and oil demand growth,” said Victor Shum, senior partner at Singapore energy consultant Purvin & Gertz.
Portugal remained the main focus among euro zone government bond markets. Concern over the exposure of Banco Espirito Santo (BES), the country’s largest listed lender, to the troubled companies of its founding family has been a main driver of trading in recent days.
The yields on Portugal’s benchmark 10-year bond fell more than 20 basis points to 3.74 percent and were last at 3.76 percent. Lisbon shares rose 2.7 percent, with BES shares up 17 percent.
“There must be investors there counting that most of the impact is already priced in and it’s time to buy,” said Fincor analyst Albino Oliveira.
Gold held near a four-week low thanks to the stronger dollar and worries the Fed could raise rates faster than expected. Spot gold was last at $1,298.90. (Additional reporting by Wayne Cole in Sydney, Keith Wallis in Singapore, Alistair Smout in Edinburgh, Anirban Nag, Sudip Kar-Gupta and Marius Zaharia in London; Editing by Catherine Evans/Ruth Pitchford)