By Chuck Mikolajczak
NEW YORK (Reuters) - World equity indexes gained modestly on Monday as upbeat U.S. housing data helped Wall Street shrug off a weak manufacturing report, while the prospect of higher U.S. interest rates lifted the dollar for a third day.
U.S. equities rebounded from a lower open as a report showed that U.S. homebuilder sentiment rose in August to its highest level in nearly a decade.
Earlier, stocks had dropped as Empire State data showed August manufacturing activity in New York was at its weakest in years.
"Investors are in pause mode leading up to the Fed minutes later this week," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.
"The manufacturing data did cause some weakness today because it adds to the uncertainty before the rate hike decision and since the global economy is showing varying degrees of growth."
Minutes from the U.S. Federal Reserve's most recent policymaking meeting are due to be released on Wednesday. Investors await that document for clues on how soon the Fed may hike rates for the first time in nearly ten years, with many analysts expecting such a move by the end of the year.
The expectations for an impending rate hike helped the dollar rise, as did reassurance from China fixing its yuan exchange rate slightly higher for a second day running. The dollar index <.DXY> was up 0.28 percent.
Housing stocks advanced after the NAHB/Wells Fargo Housing Market index showed U.S. homebuilder sentiment rose in August to its highest since a matching reading almost a decade ago. The PHLX housing sector index <.HGX> gained 1.1 percent.
REBOUND
European stocks bounced from last week's heavy selloff of nearly 3 percent, with the pan-European FTSEurofirst 300 index <.FTEU3> closing up 0.25 percent.
MSCI's all-country world stock index <.MIWD00000PUS> edged up 0.12 percent.
Crude oil remained weak near 6-1/2 year lows, as U.S. crude
The Dow Jones industrial average <.DJI> rose 51.85 points, or 0.3 percent, to 17,529.25, the S&P 500 <.SPX> gained 9.12 points, or 0.44 percent, to 2,100.66 and the Nasdaq Composite <.IXIC> added 37.23 points, or 0.74 percent, to 5,085.46.
Germany's DAX lost 0.4 percent <.GDAXI> and France's CAC 40 climbed 0.6 percent <.FCHI>. Britain's FTSE 100 <.FTSE> was flat, ending 0.01 percent lower.
The yuan fell more than 4 percent at one point last week, pulling down riskier assets including emerging currencies globally on fears of a currency war. But China slowed the pace of the currency's drop, and on Monday fixed it higher for the second day in a row.
Benchmark 10-year notes > were last up 14/32 in price to yield 2.1502 percent from 2.198 late on Friday.
(Additional reporting by Tanya Agrawal; Editing by Bernadette Baum and Nick Zieminski)
