The sharemarket has shot up by more than 1.5 per cent at noon, with investors using yesterday's falls to lap up cheaper stocks.
CMC Markets chief market analyst Ric Spooner describes it as a relief rally following Monday's decline.
The sharemarket was up before the outcome of the Reserve Bank of Australia's policy meeting, due to conclude at 2.30pm AEDT. With expectations for another interest rate cut low, focus will be on the central bank's statement for clues over the future direction of monetary policy.
The Aussie bourse is also following positive leads out of Wall Street, where markets looked through jitters in Asia about China's moves to tighten its property market.
"It reflects the significant increase in volatility in the last couple of weeks with two big selling days: one yesterday and another on February 21," Mr Spooner said.
"But it's bouncing relatively strongly as well as reflecting the conflicted nature of the market .. money is waiting on the sidelines to come in with elevated risk in both directions."
The banks were big market movers with their attractive yields, posting almost 3 per cent gains.
ANZ was up 71.5c to $29.075, CBA rose $1.54 to $68.66, NAB rose 73c to $30.83 and Westpac rose 84c to $31.20.
Investors were not wholly embracing riskier, cyclical stocks, with major miners underperforming, suggesting sustained caution over the outlook in China. BHP Billiton was down 4.5c to $35.525, Rio Tinto up 26c to $63.91 and Fortescue Metals down 6c to $4.31.
There was some good economic news, with official sales figures showing Australian retail spending rose 0.9 per cent in January to a seasonally adjusted $21.589 billion.
The rise in the sharemarket helped local stocks reclaim all of the ground lost yesterday, when the market fell 1.5 per cent after it was caught in the fall-out of a plunge in Chinese stocks that impacted much of Asia.
Stocks in Shanghai plummeted 3.7 per cent in the previous session after Beijing announced a fresh round of tightening for the property market.
KEY FACTS
• At 12.15pm AEDT, the benchmark S&P/ASX200 index was up 78 points, or 1.56 per cent, to 5088.5 points
• The All Ordinaries index was up 75.9 points, or 1.51 per cent, to 5104.4 points
• The March share price index futures contract was up 73 points to 5094 points, with 19,975 contracts traded
• National turnover was 683.5 million securities worth $1.8bn
