Australian shares set to rebound, tracking Wall Street gains

The news: The Australian sharemarket is set to start higher with traders taking cues from solid closing gains on Wall Street on Friday amid an improving outlook for inflation.

The numbers: The Dow Jones index closed in positive territory, edging 0.01% higher, while the broader S&P 500 gained 0.70% and the tech-heavy Nasdaq advanced 1.10%. In the local market, ASX 200 futures were up 47 points or 0.61% at 7,799 points at 7:00am AEST on Monday.

The context: US stocks rose on Friday after data showed new orders for key US-manufactured capital goods rebounded more than expected in April while the University of Michigan reported that consumers' inflation expectations improved in late May after deteriorating early in the month.

However, trading volumes were subdued ahead of the Memorial Day market holiday on Monday. Markets are pricing in a 49.4% chance for a rate cut at the Fed's September meeting, down from 54.8% a week ago.