* World shares gain as China signals support for growth * Telecom deal flurry adds to European market strength * Dollar index near one-month lows as Fed tapering fears fade * Softer dollar supports gold after big rally, lifts oil By Richard Hubbard LONDON, July 23 (Reuters) - World shares pushed on towards five-year highs on Tuesday, helped by China's efforts to avoid a hard landing for its slowing economy, while gold took a breather after its biggest one-day gain in more than a year. Local media in China reported the government was looking to increase investment in railway projects to reduce gluts in steel, cement and other materials as it aims to ensure annual economic growth does not sink below 7 percent. The reports lifted stocks across Asia outside Japan by 1.3 percent to their highest since early June and gave an early boost to mining stocks in London, although a lack of detail made some in the markets cautious. "Managing to keep (growth) above 7 percent will certainly be viewed as a positive stance," said IG Markets analyst Alastair McCaig. "But they really have only five months to prove their words are worth their weight." A flurry of merger and acquisition activity and a sharp rally in telecom shares added to gains across Europe in morning trade, lifting the FTSE Eurofirst 300 index by 0.25 percent to near a seven-week high. The euro zone's blue-chip Euro STOXX 50 index was up 0.6 percent to bring its gains since late June to 10 percent, mirroring the sharp rises seen on Wall Street, where the S&P 500 hit a record closing high on Monday. The recent rally has sharpened the focus on the current corporate earnings season, with company statements closely scrutinised for signs the gains are justified. "Earnings have also been relatively good so far, although the bulk of results still have to come," said David Thebault, head of quantitative sales trading at Global Equities. "We'll have a better idea of the big picture by the end of the week, with the focus mostly on the guidance." The main focus on Tuesday will be results from tech giant Apple following weak numbers from Microsoft and Google last week. Stock index futures nevertheless pointed to Wall Street testing fresh records when trading gets underway. An upgraded economic outlook from Japan's government added to the better market tone, lifting Tokyo's Nikkei 0.8 percent and sending the MSCI world equity index up 0.2 percent. The MSCI is now within touching distance of the five-year high hit at the end of May. JAPAN RISES Heightened expectations that Japan's government will stick with its expansionary policies after weekend elections also supported the yen, which hit a one-week peak against the dollar at 99.14 yen before settling back to 99.80 yen. The losses against the yen, adding up to about 15 percent so far this year, were a major drag on the dollar, which slid to a one-month low against a basket of major currencies. Demand for the greenback has been steadily draining away as the Federal Reserve's efforts to reassure investors there will be no precipitous end to its bond-buying stimulus ease upwards pressure on U.S Treasury bond yields. "Yesterday we had some weaker U.S. housing data that reinforced that message," said Jane Foley, senior currency strategist at Rabobank. The euro has been steady as political tensions across the region ease and was flat on Tuesday at $1.3187, close to a one-month high of $1.3218. In emerging markets, the Turkish lira was near a one-month high as investors awaited an expected rate rise by the central bank to help narrow the gaping current account deficit. GOLD SHINES The weaker dollar supported gold, which rose for a fourth straight day, by 0.1 percent to $1,336.84 an ounce. The precious metal has now recovered nearly $160 from a three-year low of $1,180.71 an ounce hit on June 28. Brent oil inched down to just below $108, but it was still within touching distance of last week's 3-1/2 month high. Slippage was limited by the weaker dollar, with investors awaiting U.S. crude inventory data for further clues on the outlook for demand in the world's largest oil consumer. Threats to supply in the Middle East and North Africa also supported prices, with new clashes in Egypt and a halt in oil exports from eastern Libya after protests.