* TSX up 67.72 pts, or 0.5 pct, at 12,711.73

* Bank earnings, miners boost index

* China, U.S. data help metals, oil

* ECB loans offset euro zone recession fears

By Jon Cook

TORONTO, March 1 (Reuters) - Toronto's main stock index was higher on Thursday midday, encouraged by earnings from Canada's top two banks and upbeat economic data from China and the United States.

Royal Bank of Canada and Toronto-Dominion Bank pushed the index's financial sector up 1.4 percent after the banking heavyweights' earnings topped estimates and both raised their dividends. Shares of RBC, the country's largest bank, shot up 3 percent to C$57.37, and No. 2 bank TD was up 1.9 percent at C$82.34.

The dividend increase was the big draw for investors, said Irwin Michael, portfolio manager at ABC Funds.

"When you're only getting 1 percent in your money market and you can find a stock yielding 2 to 4 percent with the potential for capital gain, that's a bit of an aphrodisiac to get invested in the marketplace," Michael said.

"The fact that they've done that is a sign of confidence and it's dragging up the other banks as well."

Bank of Nova Scotia climbed 1 percent to C$53.86, Canadian Imperial Bank of Commerce edged up 0.6 percent to C$77.17, and insurer Manulife Financial gained 1.8 percent to C$12.60.

At noon (1700 GMT), the Toronto Stock Exchange's S&P/TSX composite index was up 67.72 points, or 0.5 percent, at 12,711.73.

The index's materials group contributed to the gain, rising 0.8 percent as mining stocks rose on higher gold and metal prices.

Canada's second-largest gold producer, Goldcorp, led the sector, rising 1.7 percent to C$48.80 as bullion prices rebounded after tumbling 3 percent the previous session.

First Quantum Minerals jumped 3.4 percent to C$23.41 as the base metals miner was helped by higher copper prices after encouraging data from top metals consumer China. China's official purchasing managers' index rose to 51.0 in February from 50.5 in January, hinting that the country will avoid a sharp slowdown.

Oil climbed above $123 a barrel on the upbeat China number and on U.S. data that showed Americans filed fewer new claims for jobless benefits last week, another sign of health in the world's No. 1 economy.

Oil and gas explorer Ithaca Energy Inc was helped by the oil-price rise and by takeover speculation, spiking nearly 9 percent to C$3.09 after the company said on Thursday it has received unsolicited takeover interest from a number of parties.

Weak 2012 earnings expectations for Bombardier Inc and Research In Motion limited gains. Bombardier shares fell 7 percent to C$4.42 after the plane and train maker said it expects a drop in aircraft deliveries and related profit margins in 2012.

RIM shares tumbled more than 4 percent to C$13.41 after analysts said the embattled Blackberry maker is likely to preannounce poor February quarter results and to forecast a "very weak" May quarter on lower sales.

• A Permanent Economic Emergency