* Wall Street shares edge higher, S&P holds above 1,400 * Dollar turns negative after jobless, housing data * Benchmark U.S. yields slip from three-month highs * Oil holds near 3-month highs on supply concerns By Richard Leong NEW YORK, Aug 16 (Reuters) - World shares edged up to near 3-1/2 month highs o n T hursday, following hints that global growth engine China is eyeing new support for its economy, while mildly disappointing U.S. data weakened the dollar. A small unexpected rise in U.S. jobless claims and a surprise drop in housing starts renewed expectations the Federal Reserve would engage in a third round of large-scale bond purchases to help the sluggish economy, spurring a rebound in safe-haven U.S. and German government bonds. A report from the Philadelphia Federal Reserve also signaled business contraction in the U.S. Mid-Atlantic region in August, though it was milder than in July. "Sleep-walking is a pretty good analogy of what is going on with the (stock) market right now," said Terry Morris, senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania. Other markets were holding in recent ranges as traders await possible policy action from U.S., European and Chinese central bankers. Oil prices held near 3-month highs on worries about possible supply disruption from tension in the Middle East and a sharp drop in U.S. inventories. Gold prices hovered above $1,600 an ounce on hopes of central bank stimulus, but somewhat encouraging U.S. economic data pared expectations any such moves might happen soon. On Wall Street, the Dow Jones industrial average was up 33.01 points, or 0.25 percent, at 13,197.79. The Standard & Poor's 500 Index was up 3.88 points, or 0.28 percent, at 1,409.41. The Nasdaq Composite Index was up 15.44 points, or 0.51 percent, at 3,046.37. Among big movers, Cisco Systems rose nearly 8 percent to $18.70 a share after the world's largest network equipment market reported better-than-expected results. Developments at several top companies, however, kept a lid on gains. Wal-Mart Stores, the world's No. 1 retailer, said its full-year results may miss Wall Street expectations as growth slows international markets. Its stock fell 3.4 percent. Facebook shares lost 6.6 percent as a lockup period that prevented some insider sales came to an end. They last traded at $19.80, down 48 percent from the $38 IPO price. Still, the overall U.S. stock market showed resilience, lifting the global MSCI index by 0.48 percent to 324.28 points. Top European shares erased early losses, rising 0.24 percent to 1,103.36. In the currency market, the dollar turned lower against most major currencies after the latest data on domestic jobless claims and home construction. The dollar index was 0.18 percent lower at 82.50. The euro stemmed its recent slide against the greenback, rising 0.35 percent to $1.2331. Hopes of additional ECB interest rate cuts were kept alive by euro zone data confirming that inflation - the ECB's main focus - remained steady in July. It came two days after reports showed the bloc's economy sliding back toward recession. The modest uptick on expectations of further central bank stimulus revived some appetite for bonds, lowering their yields. Benchmark 10-year Treasury yields slipped to 1.8086 percent after touching a three-month high of 1.8572 percent, according to Reuters data. German Bund futures rose 39 basis points to 141.80 after hitting their lowest level since July 2. In commodity trading, Brent crude futures for October delivery were unchanged at $114.31 a barrel, while U.S. oil futures were 50 cents higher at $94.80 a barrel. Gold rose for a second day, up 0.57 percent at $1,611.86 an ounce.

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