Markets in the US and Europe were on holiday but despite the lack of leads the market was up from the outset. The S&P/ASX200 lifted 0.9 per cent to 5773.4, while the All Ordinaries rose 0.9 per cent to 5770.4.

Chinese shares also gave a boost to sentiment, with Shanghai stocks up for a sixth straight session in afternoon trade. In that time, the benchmark Shanghai Composite index has lifted 13.5 per cent. The index is up a staggering 50 per cent since the beginning of the year, fuelled by three interest rate cuts by the central bank and a spike in margin lending.

"It has been strong across the board," said Alistair McCorquodale, private client adviser at Morgans. "Fortescue has added confidence and the strategy update from AGL was positive. That's a core part of a lot of retail portfolios. And you're starting to see, following earlier in the month as longer-term interest rates came creeping up, some confidence coming back into the banks."

Shares in Fortescue Metals surged 10.6 per cent to $2.40 after Fairfax Media revealed that Australia's third-largest iron ore producer has held discussions with China's largest steel producer, Baosteel, and China's largest conglomerate, CITIC, about a recapitalisation to shore up its balance sheet.

It is understood the two companies have applied to the Foreign Investment Review Board seeking permission for an investment involving Fortescue.

Iron ore miners were also helped by the metal leaping by around 2 per cent overnight, recovering some of the losses made last week to trade back above $US60 a tonne out of the port of Qingdao in China.

The big miners benefited from the rise in sentiment in the sector, with BHP lifting 1.1 per cent to $29.82 and Rio Tinto gaining 1.1 per cent to $58.29.

Among the banks, ANZ added 1.1 per cent to $32.69, Commonwealth Bank jumped 0.7 per cent to $84.64, National Australia Bank rose 1.4 per cent to $34 and Westpac climbed 2.1 per cent to $33.65.

"Ratings agencies have responded quite positively to recent measures taken by the banks to shore up capital and control residential investment lending," IG market strategist Stan Shamu said.

Fellow blue-chip Telstra firmed 0.1 per cent to $6.29.

OZ Minerals lifted 0.2 per cent to $4.89 after chief executive Andrew Cole announced the copper and gold company has four potential acquisitions it is doing due diligence on.

Woolworths put on 0.2 per cent to $28.53 after news it is facing an exodus of senior executives as costs are slashed and management structures simplified in a bid to restore sales and earnings growth.

Since chief executive Grant O'Brien and new food managing director Brad Banducci announced plans this month to cut another 400 support jobs, Woolworths has lost at least two senior executives and another two are reportedly eyeing the exit doors.

Competitor Wesfarmers gained 0.4 per cent to $44.08.

Cochlear shares shot up 1.4 per cent to $88.66 after the hearing implants maker appointed the head of its North American operations, Chris Smith, as its new chief executive.

AGL Energy is targeting about $1 billion of asset sales and $200 million of cost cuts by the end of 2016-17, as part of a restructuring under new chief executive Andy Vesey that is intended to position the company to cope with the transforming energy sector.

The shares have jumped 6.4 per cent on the news to $16.47, their highest level since early 2007.

Aristocrat Leisure gained 6.5 per cent to $8.38 after the company reported net profit surged by 35 per cent to $77.6 million due to strong growth in its US business following its $1.3 billion acquisition of Video Gaming Technologies last year and a surge in revenues from its fast-growing digital unit.

Online money transfer company OzForex was one of the worst performers of the day, despite posting a 52 per cent rise in net profit to $24.6 million for its annual 2015 results on revenue of $97.4 million, up 24 per cent. But investors took profits on the news, which missed expectations, with the stock plunging 10.5 per cent to $2.38.