The sharemarket broke a five-day losing streak, as Japan's sharemarket stabilised and S&P500 futures pointed to modest gains on Wall Street.
Resources stocks remained jittery after recent signs of weakness in China, while banks and telecommunications companies mostly rose on yield-related demand.
The benchmark S&P/ASX200 closed up 0.2 per cent at 4970.7, after hitting a five-week low of 4931.2 yesterday. Value shrank to $4.2 billion due to holidays in Britain and the US.
Tuesday's rise came as Japan's Nikkei 225 gained 1.2 per cent after last week's tumble, and as US S&P 500 futures crept up 0.5 per cent before the reopening of US trading after the Memorial Day holiday.
Analysts remained wary of offshore selling because a 6.9 per cent fall in the Australian dollar this month has coincided with a 4.3 per cent fall in the S&P/ASX200, pushing the domestic bourse into negative territory for the year in US dollar terms.
"The greatest market risk looks to be to the downside," said CMC Markets chief market analyst Ric Spooner. "In the absence of news, it seems less likely that we will get the kind of catalyst necessary to attract buyers back to the market."
High-yield plays lent support, with Commonwealth Bank, Westpac, ANZ and Telstra up between 0.6 per cent and 0.9 per cent.
"Dividend yield support is cushioning the market from any major collapse and the falling Australian dollar will benefit the market once the fall stabilises," said Goldman Sachs institutional dealer Richard Coppleson.
However, in the resources sector, BHP Billiton and Rio Tinto shares both hit fresh five-week lows today before closing down 0.1 per cent and 0.4 per cent respectively.
Concern centred on China, where Shanghai steel reinforcement-bar or rebar futures hit a fresh nine-month low on Tuesday. Spot iron ore dived 1.9 per cent to $US120.90 a tonne today, its lowest point in almost six months.
China is due to report official manufacturing purchasing managers' index data on Saturday. Last week, HSBC's "flash" manufacturing PMI index suggested the sector contracted in May.
But in a show of confidence in the domestic market, Citi raised its year-end forecast to 5400 from a previous forecast of 5200, while also forecasting a rise to 5600 by the middle of 2014.
"The market multiple remains only at around an average level, and this should be sustainable, as the market still seems on track for moderate earnings growth in fiscal 2014," Citi strategists Tony Brennan and Zee Yusuf said in a report.
While a sharp rise in bond yields was a "clear risk" for equities, the cautious approach the Federal Reserve appeared intent on taking meant that's "less likely," the strategists added.
Citi last week moved Australia from overweight to underweight in its international model.
