1. U.S. services data ahead

Markets looked ahead to more U.S. data to see if the economy is robust enough to withstand monetary tightening in the months ahead.

The U.S. Institute of Supply Management is to release data on August service sector activity at 14:00GMT on Tuesday. The gauge is expected to inch down 0.5 points to 55.0. Anything above 50.0 signals expansion.

The data takes on extra importance after the ISM manufacturing survey published last week showed a shocking contraction in activity.

Investors are pricing in a 27% chance of a rate hike at the Fed's September 20-21 meeting.

While expectations for a near-term rate hike have been scaled back, investors still believe the Fed will hike rates at least once before the end of the year, most likely in December.

2. Takeover talk

Shares in Monsanto (MON) are set to surge at the open after Germany's Bayer (BAYRY) sweetened its bid to buy the world's largest seed seller.

Bayer said it is now willing to pay $127.50 per Monsanto share, about $20 above Friday's closing price. That values the offer at $55.8 billion. Including Monsanto's debt, the deal would be worth $65 billion.

Monsanto said it is considering the offer "as well as proposals from other parties and other strategic alternatives."

Meanwhile, Softbank (SFTBY) has completed its $32.5 billion purchase of ARM Holdings (ARMH, Tech30), a British company that designs the chips used in cellphones and electronic gadgets around the world. The heads of both firms issued a statement Tuesday saying: "It is business as usual -- only better."

3. RBA leaves interest rates on hold

The Reserve Bank of Australia kept its benchmark interest rate on hold at 1.5% in a widely expected decision, and signaled that they would remain unchanged for the time being, citing signs of continued growth despite global headwinds.

The policy meeting was the last one chaired by long-standing governor Glenn Stevens before he retires this month. Stevens will be replaced by his current deputy, Philip Lowe, who in turn is being replaced by another career RBA banker, Guy Debelle.

The Aussie climbed to as high as 0.7654 against the U.S. dollar, the most since August 26. It was last at 0.7640. up nearly 0.8%.

4. Earnings and recap

It's a relatively light day for earnings. Semiconductor firm Marvell (MRVL) will report quarterly results ahead of the open. Dave & Buster's (PLAY) and Casey's General Store (CASY) will report after the close.

U.S. stock markets were relatively perky ahead of the Labor Day weekend. The Dow Jones industrial average, S&P 500 and Nasdaq each gained 0.4% on Friday.