The Australian sharemarket staged an impressive turnaround to post a gain in a session that followed the wildest swings in US bond markets since before the global financial crisis. A late surge in the big four bank stocks led the recovery.

After dipping by as much as 1.6 per cent in early trade on Thursday, the benchmark S&P/ASX 200 Index added 0.2 per cent to 5254.9 points, while the broader All Ordinaries Index edged up 0.1 per cent to 5244.3 points.

On Wednesday night, US 10 year Treasuries zig-zagged wildy. Yields dived as much as 14 per cent to as low as 1.86 per cent as investors piled into the bond market, before a sell-off drove them back above 2 per cent. Bond yields and prices move inversely. In US equity markets the S&P 500 Index and Dow Jones Industrial Average were both weaker but closed well above their intraday lows.

"It was a pretty amazing move in US bond markets on Wednesday night and that certainly gives investors cause to pause and think," UBS head of fixed income in the Asia Pacific region Anne Anderson said.

There was no clear catalyst for the plunge in the US bond market, which followed some soft retail data, she said.

"Fear was at play, and while the global growth outlook is softening, the wild swing in the bond market overplayed the seriousness of the change in market fundamentals," Ms Anderson said.

Many investors simply shrugged off what they saw as the inevitable of volatility, which hopefully will create buying opportunities in coming months.

"We remain in a long-term bull market, which I think has another couple of years to run. The economy and market are mid-cycle, and a mid-cycle correction would offer an opportunity for investors to get into the market at reduced valuations, " Fidelity Worldwide Investment global chief investment officer Dominic Rossi said.

In the local bond, currency and equity markets on Thursday, the severity of the reaction was comparatively muted, but the benchmark index lost as much as 80 points before staging its afternoon recovery.

The big four banks all pushed higher to lift the bourse. Commonwealth Bank of Australia rose 0.6 per cent to $75.93, while Westpac Banking Corporation lifted 0.8 per cent to $32.73. ANZ Banking Group gained 0.7 per cent to $31.58, and National Australia Bank jumped 1 per cent to $32.88.

Among other blue-chip names Telstra Corporation added 0.9 per cent at $5.43.The biggest food and liquor sellers were also stronger. Woolworths rose 0.9 per cent to $34.81, while Wesfarmers, owner of Coles, added 0.2 per cent to $41.22.

However, the miners came under pressure as the spot price for iron ore, delivered at the Qingdao Port in China, dipped 1.5 per cent to $US82.55 a tonne.

Resources giant BHP Billiton dropped 1.4 per cent to $33.33, main rival Rio Tinto fell 1.8 per cent to $59.89, and iron ore miner Fortescue Metals Group dipped 6 per cent to $3.42.

Energy was the best-performing sector, up 1.4 per cent, despite crude oil prices sinking even deeper into their four-year low. Brent crude oil was 1 per cent lower at $US82.91 a barrel.

Australia's biggest oil producer Woodside Petroleum lifted 1.7 per cent to $39.66 after lifting its full-year production target for the second time in three months. The company delivered a strong September quarter production report helped by a rise in liquefied natural gas prices.

Oil and gas junior AWE Ltd was the best-performing stock in the ASX 200, up 5.4 per cent to $1.67.

"Senex Energy, Drillsearch Energy, and AWE Ltd all performed well on Thursday as investors saw a good entry point after the recent sell off, especially given the view that oil prices are likely to rebound in 2015," Wilson HTM Investment Group senior resources analyst James Redfern said.

Laos focused copper miner Panaust was the worst-performing stock in the ASX 200, down 6.6 per cent at $1.75.