* Chinese data suggest second quarter slowdown less sharp than feared
* European shares track Asian gains after Chinese data
* Oil firm at 3-1/2 month high, copper sheds gains
By Marc Jones
LONDON, July 15 (Reuters) - European stocks pared gains along with the commodities-linked Aussie dollar on Monday as better-than-feared Chinese growth led investors to book profits ahead of U.S. data later and this week's deluge of top company earnings.
European shares began to sag by midday as London's FTSE, Frankfurt's DAX and Paris's CAC 40 trimmed earlier gains back to 0.1 to 0.3 percent, putting them roughly in line with Asian bourses for the day.
China's economic growth cooled to 7.5 percent in the second quarter from a year ago as expected, while other figures showed a healthy rise in retail sales and a minor undershoot of forecasts in industrial output.
Comments by Beijing last week had led markets to think the numbers might have been weaker, so the outcome brought relief. Commodities initially drove higher, but like stocks saw some profit-taking following a strong week last week.
Oil slipped from a 3-1/2 month high as it hovered just under $109 a barrel, while copper, gold and silver were all nursing minor losses.
The Australian dollar, closely attuned to China's fortunes due to its appetite for Aussie raw materials, lost some of its post-data ground to stand 0.2 percent higher at $0.9095.
The U.S. dollar was up 0.3 percent on the day against a basket of currencies ahead of U.S. retail sales at 1230 GMT. The data will provide a timely take on the country's economy ahead of Federal Reserve Chairman Ben Bernanke's two-day appearance in Congress from Wednesday.
Markets went into a mild panic last month when the Fed laid out a rough timetable for phasing out its stimulus, but Wall Street roared back to all-time highs last week after a campaign by the world's top central banks to soothe market concerns.
"We are of the view that the U.S. recovery remains on track so we don't think there will be any delay to the start of the tapering process (of Fed stimulus) said Alvin Tan, an FX strategist at Societe Generale.
"Bernanke is unlikely to come across more dovishly than he did last week which undoubtedly surprised the market."
The U.S. dollar edged up 0.3 percent against a basket of top currencies as the retail sales data neared, while Wall Street was expected to open a touch higher after its record finish on Friday.
"The Fed has maintained (that tapering stimulus) is data dependent and so retail sales data today is key," said Paul Robson, currency strategist at RBS.
"We still buy into the idea of relative outperformance of the U.S. economy, and that supports the dollar. But I don't think we will get another kicker higher on retail sales or on Bernanke's testimony," he added.
Banking giant Citi kicks off this week's blizzard of earnings, which includes most of Wall Street and a host of U.S. bellwethers such as Microsoft, IBM and Coca Cola.
"U.S. equities have not really been ruffled by the rise in bond yields," said Soc Gen's Tan.
"The S&P 500 has been one of the top performers in the world so basically it is a story of U.S. recovery, and the rise in Treasury yields and U.S. equities is consistent with that."
In the bond market, trading was largely subdued.
Benchmark German Bund futures were 15 ticks lower on the day at 143.51 having gained almost two points last week while a selloff in Portuguese bonds steadied as traders awaited developments after its political troubles.
French bonds, meanwhile, gave a Gallic shoulder shrug to a downgrade by Fitch after it became last of the big three ratings firms to strip Paris of its AAA status on Friday.
"Conservative bond investors, such as reserve managers, used to have triple-A only mandates but they have adapted to the reality that there aren't many triple-As anymore," said Nikolaos Panigirtzoglou, head of global asset allocation at JPMorgan.