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Stocks up around the world on China data, M&A

By Ryan Vlastelica

NEW YORK (Reuters) - Stock markets around the world rose on Wednesday, with the Dow Jones industrial average ending at record levels as strong China growth data and potential big deals in the United States boosted investor sentiment.

Commodity prices also found support from the Chinese data, which pointed to improving demand, while gold rebounded after a two-day drop and Europe rose on easing concerns over the vulnerability of Portugal's largest listed lender.

Wall Street stocks gained on proposed acquisition activity. Time Warner Inc jumped 17 percent after Twenty-First Century Fox confirmed it had made an $80 billion offer for Time Warner, which turned it down.

Investors also took heart from a round of positive earnings, including from tech bellwether Intel Corp, which rose 9.3 percent to $34.65 on better-than-expected results.

Equity prices have stalled recently as investors questioned whether fundamentals justified indexes being at or near records. 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 gained 77.33 points, or 0.45 percent, to 17,138.01, the S&P 500 rose 8.26 points, or 0.42 percent, to 1,981.54 and the Nasdaq Composite added 9.58 points, or 0.22 percent, to 4,425.97.

The U.S. 10-year Treasury note rose 5/32 in price, yielding 2.5323 percent.

In Europe, the pan-European FTSEurofirst 300 equity index jumped 1.3 percent, its biggest one-day advance since April 29 as concerns eased over the exposure of Portugal's Banco Espirito Santo 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.

U.S. DOLLAR RISES

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 $1.3525 while the dollar was flat against the yen at 101.70 yen.

One of the biggest movers was the New Zealand dollar, which dropped 0.7 percent to a low of $0.8707 after benign inflation data that could reduce pressure on the central bank to tighten policy.

U.S. crude oil futures rose 1.4 percent to $101.32 per barrel after the China data, while Brent crude hovered around $106 after hitting a three-month low of $104.39 on Tuesday.

Gold rose 0.3 percent but held near a four-week low, having fallen more than 3 percent over the first two sessions of this week. Silver rose 0.3 percent while copper fell 0.7 percent.

(Editing by Meredith Mazzilli, James Dalgleish and Dan Grebler)

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