* China data boosts stocks and oil outlook
* U.S. shares also rally on M&A activity, earnings
* Europe rises on easing concerns over Portugal bank (Updates to midday trading)
By Ryan Vlastelica
NEW YORK, July 16 (Reuters) - Stock markets around the world rose on Wednesday as strong China growth data and potential big deals in the United States boosted investor sentiment while concerns eased over the vulnerability of Portugal’s largest listed lender.
Commodity prices also found support from the Chinese data, which pointed to improving demand, while gold rebounded after a two-day drop.
Major U.S. stock indexes inched back towards record levels on proposed acquisition activity. Time Warner Inc jumped 18 percent after Twenty-First Century Fox confirmed it had made an $80 billion offer for Time Warner, which the company turned down.
Investors also took heart from a round of positive earnings, including from tech bellwether Intel Corp, which rose 7.2 percent to $33.99 on better-than-expected results.
Equity prices have stalled recently, with many indexes at record or multi-year highs, as investors questioned whether fundamentals justified those levels. On Tuesday, shares dipped after Federal Reserve Chair Janet Yellen said some sectors of the U.S. stock market had “substantially stretched valuations.”
“The M&A activity and results really validate current levels, which Yellen had raised a red flag on,” said Nicholas Colas, chief market strategist at the ConvergEx Group in New York.
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 data confirmed the economy had stabilized after a shaky start to the year, though analysts said the pick-up was largely driven by government stimulus.
“There’s a lot of good news to go around today, but given all the worries there were about China, the data there is especially a positive,” Colas said.
The MSCI International ACWI Price Index rose 0.5 percent on the day.
The Dow Jones industrial average rose 64.35 points or 0.38 percent, to 17,125.03, the S&P 500 gained 7.29 points or 0.37 percent, to 1,980.57 and the Nasdaq Composite added 18.61 points or 0.42 percent, to 4,435.00.
The U.S. 10-year Treasury note rose 3/32 in price to yield 2.5377 percent.
In Europe, the pan-European FTSEurofirst 300 equity index popped 1.3 percent, its biggest one-day advance since April 29 as concerns eased over the exposure of Portugal’s Banco Espirito Santo (BES) to the troubled companies of its founding family.
“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.
Lisbon shares rose 3.1 percent, with BES shares soaring 20 percent.
The U.S. dollar index, which values the greenback against a basket of currencies, rose 0.2 percent, advancing for a second straight session to hit its highest in a month after Yellen said interest rates could rise sooner than expected if employment data improved.
The euro was down 0.3 percent at $1.3527 while the dollar was flat against the yen at 101.70 yen.
One of the biggest movers was the New Zealand dollar, which dropped 0.6 percent to a low of $0.8715 after benign inflation data that could reduce pressure on the central bank to tighten policy.
U.S. crude oil futures rose 1.3 percent to $101.21 per barrel after the China data, while Brent crude climbed above $106 after hitting a three-month low of $104.39 on Tuesday.
Gold rose 0.5 percent but held near a four-week low. It fell more than 3 percent over the first two sessions of this week. Silver rose 0.3 percent while copper fell 1 percent. (Editing by Meredith Mazzilli and James Dalgleish)