The Australian market closed around three per cent higher on Monday for its biggest one-day percentage rise in six weeks.

The local rally followed strong offshore leads, a surge in commodity prices and comments by the US Federal Reserve heralding the global economic recovery.

At 1615 AEST, the benchmark S&P/ASX200 index was up 135.5 points, or 3.16 per cent, at 4426.1 points, its strongest close since july 14.

The broader All Ordinaries index had risen 128.5 points, or 2.98 per cent, to 4434.2 points.

On the Sydney Futures Exchange, the September share price index contract was 147 points higher at 4398 on a volume of 29,489 contracts.

CMC Markets' senior dealer Matt Lewis said a 155-point surge on the Dow Jones Industrial Index on Wall Street on Friday set the positive tone for Asian markets on Monday.

"That momentum and confidence, particularly the comments from Ben Bernanke, have flowed into our market today," he said.

US Federal Reserve chairman Dr Bernanke told central bankers in Wyoming that conditions had "levelled out" and the global economy was "beginning to emerge" from recession and that the prospects for a recovery "appear good".

Mr Lewis said larger miners led the local market higher on the back of an "exceptionally strong" performance by base metals on the London Metals Exchange,

Copper rallied more than five per cent, which supported BHP Billiton on Monday, finished $1.57 or 4.29 per cent higher at $38.18, while Rio Tinto jumped $2.67 or 4.74 per cent to $58.98.

"The theme of companies reporting surprising on the upside has continued," Mr Lewis said.

"The actual results have been at the top end of guidance if not above guidance."

Crude oil was up over US$1.00 in New York on Friday, which saw local oil stocks benefit, he Mr Lewis said.

Santos finished 71 cents, or 4.76 per cent, higher at $15.62, while Woodside Petroleum advanced $1.93 or, 4.09 per cent, to $49.08 and Oil Search gained 16 cents, or 2.84 per cent, to $5.80.

Major lenders also gained, with Westpac leading the sector, Mr Lewis said.

Westpac finished 99 cents, or 4.35 per cent, higher at $23.73, while ANZ Banking Group jumped 78 cents, or 4.1 per cent to $19.81.

National Australia Bank advanced $1.00 or 3.89 per cent, to $26.68 and Commonwealth Bank added $1.06 or 2.43 per cent, to $44.61.

Regional player Suncorp Metway Ltd jumped 36 cents, or 4.84 per cent to $7.80 ahead of its full-year results announcement on Tuesday.

IG Markets' analyst Ben Potter said the banking sector's lift was supported by strong financial leads from the US.

Shares in wealth managers and insurers were also stronger, with AXA Asia Pacific gaining 19 cents to $4.39, AMP 19 cents higher at $6.16 and Insurance Australia Group firming eight cents at $3.63.

Gains by gold miners were a little more subdued, with dual-listed Newmont Mining the best performer, adding 15 cents to $4.92.

Lihir Gold gained four cents to $2.49 and Newcrest Mining advanced 79 cents to $29.34.

By 1635 AEST the spot price of gold in Sydney was US$953.80 per fine ounce, up US$13.55 on Friday's close of US$940.25 per ounce.

By 1637 AEST Telstra Corporation was down 11 cents, or 3.17 per cent, at $3.36 continuing Friday's drop that followed a selldown by the Future Fund, the nation's sovereign wealth fund.

Major retailers were stronger. Wesfarmers, owner of Coles Group, gained $1.16 to $26.31 and Woolworths firmed 52 cents to $28.01.

Clothing marketer and distributor Pacific Brands surged nine cents to $1.30 and department store owner David Jones added 10 cents to $4.78.

Media stocks were stronger, with News Corporation leading the sector, up 72 cents at $15.62 and its non-voting scrip jumping 69 cents to $13.46.

Fairfax Media gained five cents to $1.46 after the medial group posted a $380 million net loss but said the decline in advertising revenue appeared to have bottomed.

Qantas Airways lifted 12 cents to $2.64 and Virgin Blue Holdings was steady at 38.5 cents.

Bounty Oil and Gas NL was the top traded stock by volume, with 161.69 million shares changing hands for $23.75 million.

Bounty's shares leaped 1.5 cents, or 12.5 per cent, to 13.5 cents.

Preliminary national turnover reached 2.63 billion shares, traded for a value of $5.53 billion, with 769 stocks up, 358 down and 314 steady.