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  • The Dow Jones Industrial Average climbed 236.08 points, or 0.9%, to close at 26,664.40.
  • The S&P 500 added 23.49 points, or 0.7%, touching 3,294.61 at the close.
  • The Nasdaq Composite added 157.52 points, or 1.5%, to close at 10,902.80. 

Global equity markets started what is usually a poor month for equities positively, buoyed by evidence that the manufacturing recovery is holding up amid rising COVID-19 cases, particularly in the US.

The three US benchmarks advanced on Monday and Nasdaq ended the day at a record closing high.

The technology stocks continue to outperform while investors bank on a coronavirus stimulus agreement while leaning on strength in earnings and a flurry of merger activity.

The S&P 500 finished just 2.7% below its Feb for te 19th record close while the Dow was 9.8% under its record close.

The Dow Jones Industrial Average climbed 236.08 points, or 0.9%, to close at 26,664.40. The S&P 500 added  23.49 points, or 0.7%, touching 3,294.61 at the close. The Nasdaq Composite added 157.52 points, or 1.5%, to close at 10,902.80. 

Of the S&P 500’s major sectors, technology was by far the biggest gainer, closing up in its fourth consecutive advance. It was the sector’s biggest two-day percentage gain since April 7. 

In corporate news, Microsoft MSFT jumped 5.6% after it said it would push ahead with talks to buy the operations of Chinese-owned TikTok.

In other markets,  the Euro Stoxx 50 and the FTSE 100 were up 2.3%, The yield on the US 10-year note rose 2.3bps to 55.1bps.

In commodities, oil prices were higher pertaining to the optimistic tones provided by the manufacturing data, with WTI up 1.3% to USD40.81/bbl. Gold was down 0.4% at USD1967.96/oz as the US dollar starts its correction. 

No progress on Capital Hill

Meanwhile, progress is nowhere to be seen in the fiscal stimulus talks on Capitol Hill.

Republicans are griping that House Speaker Nancy Pelosi won’t drop her expansive wish list.

At this stage, several more days of talks are going to be needed but it would appear the market has this factored in now as the delays are doing little to hinder progress on Wall Street. 

US data

Manufacturing on the mend, labour market lagging: 

The US manufacturing ISM rose 1.6pts to 54.2 in July, its highest reading since March last year. New orders jumped to 61.5 from 56.4 and prices paid lifted slightly to 53.2 from 51.3.

However, employment is still contracting, with that sub-gauge still below 50.0 at 44.3 (but up from 42.1 in June). Both the ADP and labour market report later this week are expected to show that the recovery in jobs has moderated materially and there are very real fears that the recovery may falter if policy makers fail to cut a deal,

analysts at ANZ Bank explained.


S&P 500 levels

In economic data, the Institute for Supply Management reported that its manufacturing gauge rose to a reading of 54.2, while new orders jumped to 61.5. MarketWatch-polled analysts had forecast the purchasing managers index to rise to 53.6, from 52.6 in June. Any reading above 50 indicates expansion in factory activity.

“The ongoing uncertainty around the virus and state of the economy still raises questions on the sustainability of the rebound in manufacturing. The strong July report provides further confirmation of improvement in recent months,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

A raft of stronger-than-expected manufacturing purchasing managers indexes in Europe and in China, signaling a steadying global economy, helped to set the stage for the upthrust in the market.

For all that, there are still no signs of a stimulus package agreement between Democrats and Republicans after negotiations over the weekend failed to yield a replacement for a $600-a-week boost to unemployment benefits that expired Friday.

House Speaker Nancy Pelosi, D-California, and Treasury Secretary Steven Mnuchin revealed clear fault lines in negotiations between the parties during Sunday talk shows. Pelosi said that “we’ll be close to an agreement when we have…an agreement,” speaking to ABC’s Martha Raddatz on “This Week.”

At issue for Democrats and Republicans is the amount of unemployment assistance for Americans. The White House has come out in favor of reducing the federal assistance to $200 a week, Democrats have called for keeping it at $600 a week. However, the parties appear to both support a fresh round of stimulus checks of $1,200 for workers.

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The fight for aid for out-of-work Americans comes ahead of Friday’s July report on the labor market that will be examined to determine the impact on employment as cases of the infection have steadily risen in a number of states.

Indeed, coronavirus infections in the U.S. reached a record in July, with more than 1.9 million new cases. The U.S. has nearly 4.7 million confirmed COVID-19 cases and about 155,000 deaths, while the global tally for infections stands at more than 18 million and almost 690,000 deaths, according to data compiled by Johns Hopkins University.

Meanwhile, investors may focus on developments between Microsoft Corp. US:MSFT and video-sharing app TikTok, owned by a Chinese company, ByteDance. Microsoft confirmed talks to buy the American unit of the company and Microsoft CEO Satya Nadella said he spoke with President Donald Trump. Trump on Friday had signaled that he was considering a ban of the popular app. On Monday, Trump said he favored an outright purchase of TikTok by Microsoft and said that the deal should be completed before Sept. 15 if TikTok isn’t avoid a U.S. ban.

Trump on Monday suggested the U.S. government should get part of the proceeds of any sale of TikTok.

Secretary of State Mike Pompeo over the weekend said that the White House may take action against other Chinese software companies, highlighting elevated tensions between Beijing and Washington.

On the Federal Reserve front, Dallas Fed President Robert Kaplan said the economic rebound this quarter “is more muted” than expected and, as a result, the unemployment rate this year will likely be higher than previously thought.