Key Points:

The sharemarket surged 1 per cent as buyers snapped up stocks sold down yesterday, encouraged by smoother sailing in overseas markets.

The NZSX-50 index closed up 43.58 points at 4160.43, on turnover totalling $150.4 million. Rises outnumbered falls 54 to 39.

"Bargain hunters have come back into the market today, and that seems to be in reaction to the volatility reducing a wee bit overseas, the Dow Jones has had two good nights in a row," said Hamilton Hindin Greene partner Grant Williamson.

Fletcher Building rose 29c to 1247, having lost 42c yesterday after reporting a record profit but signalling flattish trading ahead.

"I think the analysts have done their work on that result overnight, and have pretty much given it a tick that it's actually a good result in challenging conditions," Mr Williamson said.

Top stock Telecom was flat at 434 after announcing it had opened two Auckland exchanges to rivals ihug and Orcon for trials today.

"Still the threat of regulation there, and still selling pressure following their disappointing guidance," Mr Williamson said.

Contact Energy rose 4c to 944, while weakness in the New Zealand dollar overnight helped the Fisher & Paykel stocks recover from falls yesterday. F&P Appliances was up 2c at 350, and F&P Healthcare rose 11c to 350.

Takeover target Auckland Airport was up 6c at 316, having tumbled from 350 in July as doubts emerged about Dubai Aerospace Enterprise's bid for control.

"The potential for corporate activity has not gone away, but it has probably diminished slightly following the credit concerns overseas, private equity are going to struggle to raise cheap capital like they have in the past," Mr Williamson said.

Casino operator Sky City was up a cent at 467, while Sky TV jumped 19c to 565 in reaction to a broker report recommending the stock as a "buy".

Hallenstein Glasson rose 14c to 475, to build on yesterday's 16c rally.

Infratil, under pressure recently due to a proposed $175m capital raising, was up 6c at 304, while Port of Tauranga lost 2c to 688. Air New Zealand lost 6c to 253, NZX rose 20c to 1030, PGG Wrightson rose 3c to 185, and Mainfreight was up 5c at 755.

The Warehouse rose 6c to 625, Steel & Tube was also up 6c, at 475, and Tower rose 4c to 226.

Small cap investment company Salvus rose 4 per cent, or 4c, to 99 after turning to a $7.7 million annual net profit from a loss of $425,000.

Among dual-listed stocks, ANZ was up 15c at 3240, Westpac rose 52c to 2974, Goodman Fielder rose 8c to 280, and Lion Nathan was flat at 950. Telstra shed 22c to 508 after posting a 2.9 per cent rise in annual profit but forecasting a cautious outlook for the current year.

Australia's benchmark S&P/ASX 200 Index was up 0.8 per cent at 6149, while Japan's Nikkei average was up 0.9 per cent.

Earlier in the US, stocks rose for a third session, a day after the Federal Reserve reassured investors about the economy and technology bellwether Cisco, raised its revenue outlook.

- NZPA