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A friendly takeover of the ASX's largest listed technology firm helped propel the market to fresh heights  

The S&P/ASX 200 hit blue skies 15 minutes into the trading day. By mid-session, the index had extended its advance to 111 points or 1.5 per cent at 7505.

Afterpay soared 22.31 per cent after announcing Twitter founder Jack Dorsey's Square will acquire the Aussie BNPL leader for $39 billion. Santos and Oil Search rallied after agreeing terms to create a $21 billion global energy giant.

Elsewhere, gains in Newcrest, CSL and the banks helped offset declines in most of the bulk metal miners after iron ore dived more than 7 per cent.

What's driving the market

A long-awaited consolidation in the crowded 'Buy Now, Pay Later' space appears to be underway after US payments giant Square swooped on the Australian leader. Afterpay announced it had agreed to an all-stock takeover that values the company at around $39 billion, a 30.6 per cent premium to Friday's closing price.

“Square and Afterpay have a shared purpose," Jack Dorsey, co-founder and CEO of Square, said. "We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles.”

Australian shareholders will receive 0.375 shares of Square Class A common stock for each of their shares in Afterpay. Co-founders and co-CEOs Anthony Eisen and Nick Molnar will stay on.

“The transaction marks an important recognition of the Australian technology sector as homegrown innovation continues to be shared more broadly throughout the world. It also provides our shareholders with the opportunity to be a part of future growth of an innovative company aligned with our vision,” Mr Eisen and Mr Molnar said in a statement.

The news stoked interest in other local players. Z1P Co climbed 9.04 per cent, Sezzle 3.33 per cent and Splitit 8.7 per cent. humm gained 3.21 per cent, IOUpay 6.25 per cent and Laybuy Group 5.81 per cent.

On the wider market, all 11 sectors advanced, aided by first-of-month institutional buying and optimism about a new reporting season. Much of the market will report full-year earnings over the next four weeks.

Upbeat US futures helped soothe any worries about Friday's US sell-off. S&P 500 futures jumped 20 points or 0.45 per cent, hinting at a swift reversal of the 0.54 per cent decline that ended last week.  

House values across the nation's capitals climbed 1.6 per cent last month, extending the increase over the last 12 months to 16.1 per cent. Prices in Canberra, Hobart and Darwin have risen more than 20 per cent in the last year, according to the CoreLogic Hedonic Home Value Index.  

Job advertising declined for the first time in 14 months as the Greater Sydney lockdown took effect. Total advertising declined 0.5 per cent.

Going up

On a day of major merger news, Santos and Oil Search announced they  had agreed terms after Santos revised its offer for its PNG rival. Under the new proposal, Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share, up from a ratio of 0.589:1 under the initial offer.

The Oil Search board said they intended to recommend the offer, subject to each side carrying out due diligence and gaining shareholder, regulatory and PNG court approval. Oil Search shares rallied 4.99 per cent. Santos gained 0.31 per cent.

The financial sector has tracked sideways for more than a month, but hit a four-week peak this session. NAB rose 2.58 per cent, CBA 2.09 per cent, Westpac 2.08 per cent and ANZ 1.7 per cent.

Other movers at the heavyweight end included gold miner Newcrest +1.89 per cent, biotech CSL +1.92 per cent and supermarket Coles +1.89 per cent.

Going down

Most of the nation's iron ore giants retreated from last week's record highs following a sharp retreat in iron ore. The spot price for ore landed in China dived 7.4 per cent on Friday as China ramped up an environmental clampdown on steel output. The setback extended ore's decline last week to 10.6 per cent.

Data over the weekend showed a slowdown in Chinese factory activity. The official manufacturing PMI eased to 50.4 last month from 50.9 in June. Services activity also eased a fraction, from 53.5 to 53.3.

"None of the factors for slower manufacturing and non-manufacturing growth have gone away," ING's chief economist for Greater China, Iris Pang, said. "In fact, more policy directions were announced on 30 July, and they are directly from a meeting chaired by President Xi. Those policies aim at solving problems to achieve long-term economic stability, which could sacrifice short-term growth momentum." 

Fortescue Metals fell 2.03 per cent. Rio Tinto lost 0.46 per cent. BHP inched up 0.02 per cent. Champion Iron dropped 4.08 per cent.

Other markets

A mixed morning on Asian markets saw the Asia Dow gain 0.88 per cent and Japan's Nikkei add 1.59 per cent. China's Shanghai Composite and Hong Kong's Hang Seng both dipped 0.08 per cent.

Oil reversed into the new month. Brent crude dropped US$1.11 or 1.47 per cent to US$74.30 a barrel.

Gold retreated US$3.10 or 0.17 per cent to US$1,814.10 an ounce.

The dollar eased 0.09 per cent to 73.35 US cents.

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