* 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 the open of U.S. trading, changes byline and dateline, previously LONDON)
By Ryan Vlastelica
NEW YORK, July 16 (Reuters) - Stock markets around the world rose on Wednesday as strong China growth data and solid U.S. company earnings boosted sentiment and concerns eased over the strength of Portugal’s largest listed lender.
Commodity prices were also supported by the China economic data, which pointed to improving demand, while gold rebounded off a two-day drop.
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,” said Nicholas Colas, chief market strategist at the ConvergEx Group in New York.
The MSCI International ACWI Price Index rose 0.4 percent on the day.
Equity prices have stalled recently, with many indexes at record or multi-year highs, as investors questioned whether fundamentals justified the levels. On Tuesday, shares dipped after U.S. Federal Reserve Chair Janet Yellen said some sectors of the U.S. stock market had “substantially stretched valuations.”
Merger activity in the United States also boosted stocks, along with a round of positive earnings, including from tech bellwether Intel Corp, which rose 6.4 percent to $33.73 on better-than-expected results.
Time Warner Inc jumped 18 percent after Twenty-First Century Fox confirmed it had made an $80 billion takeover offer for the company, an offer that was turned down.
“The M&A activity and results really validate current levels, which Yellen had raised a red flag on,” Colas said.
The Dow Jones industrial average rose 46.81 points or 0.27 percent, to 17,107.49, the S&P 500 gained 6.16 points or 0.31 percent, to 1,979.44 and the Nasdaq Composite added 19.83 points or 0.45 percent, to 4,436.22.
The U.S. 10-year Treasury note rose 2/32 in price to yield 2.5413 percent.
In Europe, the pan-European FTSEurofirst 300 equity index popped 1.2 percent, the 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 2.7 percent, with BES shares up 17 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 and hitting its highest in a month. The gain came after Yellen said interest rates could rise sooner than expected if employment data improved.
The euro was down 0.3 percent at $1.3536 while the dollar was flat against the Japanese yen at 101.65 yen.
One of the biggest movers in currencies was the New Zealand dollar, which dropped 0.6 percent to a low of $0.8718 after benign inflation data that could reduce pressure on the central bank to tighten policy.
In commodity news, U.S. crude futures rose 1.3 percent to $101.21 after the China data, while Brent crude climbed above $106 a barrel. Brent hit a three-month low of $104.39 on Tuesday.
Gold rose 0.7 percent but held near a four-week low. It fell more than 3 percent over the first two sessions of this week. Silver rose 0.4 percent while copper fell 0.2 percent. (Editing by Meredith Mazzilli)