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Australia shares jump on commodity rebound, M&A action

(Adds analysis, quotes, stocks on the move)

By Cecile Lefort

SYDNEY, April 27 (Reuters) - Australian shares jumped 0.7 percent on Monday, pulling closer to the 6,000 barrier, with miners and energy stocks benefiting the most from a rally in iron ore prices.

The S&P/ASX 200 index rose 39.9 points to 5,973.2 by 03:10 GMT, having gained 1.5 percent in the last session to post its best performance in five weeks.

A break above 5,996.4 would be the highest since 2008.

Internet service provider iiNet Ltd was a clear outperformer, up 12 percent after rival M2 Group Ltd (Other OTC: MTCZF - news) said it made an indicative offer of A$1.6 billion ($1.25 billion), topping an approach from TPG Telecom Ltd.

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There was notable action in the mining sector with Fortescue Metals Group flying nearly 12 percent higher after iron ore prices extended a rally, squeezing bearish positions.

"Given the current levels of short selling in Fortescue, we could see investors continue to cover stock with the positive price action in the spot price putting pressure on investors not wanting to be caught short," said Tristan K'nell, head of trading at Quay Equities.

Mining giants Rio Tinto (Xetra: 855018 - news) and BHP Billiton (NYSE: BBL - news) rose 3 percent and 1.9 percent respectively, pushing up the broader index.

Energy stocks also rallied with Santos up 3 percent and WorleyParsons (Stuttgart: WF9.SG - news) 2.1 percent higher.

Financials rose with Commonwealth Bank of Australia (Other OTC: CBAUF - news) , Westpac Banking Corp and National Australia Bank in the black, while ANZ Banking Group slipped 0.5 percent.

For more individual stock activity click on:

New Zealand markets are closed for a public holiday. (Editing by Simon Cameron-Moore)