* Dollar gains broadly; oil remains weak
* Empire State manufacturing way below expectations
* U.S. stocks rebound from sluggish start (Adds U.S. market open, changes byline, dateline from previous LONDON)
By Chuck Mikolajczak
NEW YORK, Aug 17 (Reuters) - World equity indexes gained modestly on Monday after a rout last week, with rosy U.S. housing data helping 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.
"Empire State (data) was horrendous compared to what the expectations were, but Empire State is also a very regional number and a very volatile number," said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.
"They are all looking to Wednesday's FOMC meeting minutes and what it is going to mean, what are they going to say."
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.
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 0.8 percent.
European stocks bounced from last week's heavy selloff of nearly 3 percent, with the pan-European FTSEurofirst 300 index .FTEU3 up 0.4 percent.
MSCI's all-country world stock index .MIWD00000PUS edged down 0.01 percent.
Crude oil remained weak, with U.S. crude CLc1 down 0.5 percent at $42.49, while Brent LCOc1 down 0.1 percent to $49.13 after data indicated Japan's economy contracted in the second quarter amid oversupply concerns.
The Dow Jones industrial average .DJI rose 29.6 points, or 0.17 percent, to 17,507, the S&P 500 .SPX gained 4.23 points, or 0.2 percent, to 2,095.77 and the Nasdaq Composite .IXIC added 16.57 points, or 0.33 percent, to 5,064.80.
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 US10YT=RR were last up 10/32 in price to yield 2.163 percent from 2.198 late on Friday.
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