That's... is used in reaction to a news heard from the other person.
Example:
A. I'm here for a month.
B. That's great!
A. Our team isn't playing well this season.
B. Oh, that's too bad.
In conversation, the top expressions for good news are: That's good / great / nice / interesting / cool / wonderful. The top expressions for bad news are: Oh, that's too bad / terrible.
Source: Touchstone
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