Australian shares set to lift after Wall Street rally

The news: The Australian sharemarket is set to start higher after a rally on Wall Street on Friday on a combination of tech stock gains and optimism that the Federal Reserve will soon start cutting interest rates.

The numbers: The Dow Jones index ended 1.64% higher on Friday, while the broader S&P 500 gained 1.11% and the tech-heavy Nasdaq climbed 1.03%. In the local market, ASX 200 futures were up 60 points or 0.76% at 7,938 points at 7:00am AEST on Monday.

The context: The major US indices ended higher as investors flocked back to tech mega caps that had triggered broad sell-offs earlier in the week. With a further four of the Magnificent Seven earnings due this week, the immediate outlook for markets may hinge on what type of results these companies deliver.

Meanwhile, economically sensitive small-caps were supported by the moderate rise in June US prices, which underlined cooling inflation and potentially positioned the Fed to start easing policy in September. Bets on a 25-basis-point cut at the Fed's September meeting held steady at about 88% after the PCE reading. Traders still largely expect two rate cuts by December.