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Aussie shares look set to rebound after Wall Street was boosted by upbeat factory data and deal-making as politicians made progress towards a new stimulus package.

ASX SPI200 index futures bounced 84 points or 1.4 per cent, setting up a strong start ahead of this afternoon’s Reserve Bank rate decision. The S&P/ASX 200 plunged 2 per cent on Friday and as much as 1.1 per cent yesterday before trimming its loss to 0.03 per cent by the close.

US stocks have rallied for four straight months and showed no evidence of fatigue on the first session of August. The Nasdaq charged 158 points or 1.47 per cent as the market-leading tech stocks set the pace. The S&P 500 gained 23 points or 0.72 per cent. The Dow added 236 points or 0.89 per cent.

Microsoft jumped 5.6 per cent after confirming it is in talks to buy the US operations of popular Chinese social media app TikTok.  US President Donald Trump backed away from previous threats to ban the app on security concerns. Apple climbed 2.5 per cent to a new record following Thursday’s well-received earnings update.

The market drew comfort from a pick-up in mergers and acquisitions. Germany’s Siemens Healthineers swooped on US medical device manufacturer Varian Medical Systems. Railroad holding company Kansas City Southern rallied 2.8 per cent on reports of private-equity interest. Google parent company Alphabet bought a 7 per cent stake in home security firm ADT.  

“The market is revolving around M&A activity possibly picking up,” Jake Dollarhide, chief executive officer of Longbow Asset Management in the US, told Reuters. “It means CEOs are more confident about the future. Otherwise, why would they lay out billions of dollars?”

A rebound in factory activity raised optimism over the economy. The Institute of Supply Management’s manufacturing index climbed from 52.6 to a 15-month high of 54.2 last month, its third straight gain and ahead of forecasts. The report followed stronger-than-expected manufacturing readings from China and Europe.

A day of negotiations over a new US$1 trillion stimulus package ended with signs the two sides of the political divide were narrowing their differences. After talks with Congressional Democrats, US Treasury Secretary Steven Mnuchin said they had made “a little bit of progress” but still had a lot of work ahead. Talks have reportedly stalled over the size of unemployment cheques.

The tech sector was the night’s clear winner, surging 2.5 per cent. Health stocks gained 1 per cent and industrials 0.4 per cent. More than half of the eleven sectors finished red, underlining the increasingly uneven nature of the tech-led market rebound since March.

Iron ore hit its highest level in a year following yesterday’s upbeat Chinese manufacturing data. The spot price for ore landed in China climbed $4.90 or 4.4 per cent to US$116.35 a dry ton. BHP’s US-listed stock put on 1.61 per cent and its UK-listed stock 2.55 per cent. Rio Tinto gained 1.43 per cent in the US and 4.13 per cent in the UK. Fortescue Metals hit a new all-time high yesterday as prices rallied.

Gold hit an intraday record before trimming its gain. Gold for December delivery settled 40 cents or 0.1 per cent ahead at US$1,986.30 an ounce after trading as high as US$2,009.50.

Oil was boosted by a round of solid manufacturing updates. Brent crude settled 63 cents or 1.5 per cent higher at US$44.15 a barrel.

Copper rebounded from its lowest level in three weeks. Benchmark copper on the London Metal Exchange rose 1.1 per cent to US$6,495 a tonne. Aluminium jumped 2.3 per cent, nickel 1.2 per cent, zinc per 0.2 cent and tin 0.6 per cent. Lead dipped 0.7 per cent.

The dollar eased 0.07 per cent to 71.18 US cents.

The Reserve Bank meets this morning. No change is expected to the cash rate, but the market will parse the post-meeting rate statement at 2.30 pm EST for any change in tone. Real estate trust BWP reports full-year earnings today.

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