MELBOURNE: Australian shares rose 0.8 percent on Wednesday, edging cautiously higher after volatility offshore in metal, oil and US stock prices, and as investors await a clearer outcome from efforts to resolve Europe's debt crisis.
Miners extended the large gains of the previous session, and banks stocks mostly firmed as reports showed European officials considering plans to make the region's bailout fund many times larger and to recapitalize banks. and .
BHP Billiton rose 0.3 percent while Rio Tinto gained 0.5 percent. Bank stocks were mixed.
"I don't think we'll see anything spectacular (on Wednesday) but it's good to see some money driven back in. The banks are not in negative territory so that's a good thing," said Lucinda Chan, division director at Macquarie Private Wealth.
She said a recent decline in the Australian dollar below the value of the US dollar and the possibility of lower interest rates next year were encouraging investors.
"There is some conservative buying -- buying at the top end of the market. People are a little more comfortable taking some money out of the bank vault and picking up (shares) while the market's so low. The opportunities are there. People are starting to top up a little bit," Chan said.
The benchmark S&P/ASX 200 index was up 26.7 points at 4,034.9 at 0124 GMT. It surged 3.6 percent on Tuesday.
New Zealand's benchmark NZX 50 index rose 0.7 percent to 3,314.3.
STOCKS ON THE MOVE:
Newcrest Mining , which fell to a 14-momnth low this week, rallied 3.2 percent to A$35.53. Bullion prices rebounded offshore before easing again as investors turned to the US dollar for safety on nervousness over European nations' commitment to a plan to recapitalise the region's banks.
"There is so much rumour mongering in the market it is hard to know what is going on. That indecision is causing a lot of volatility in the market," said Chan.
"It's not factors we can control, it's all sentiment. Anything can turn the mood and temper. They can pull their money out quickly," she said.
0122 GMT
Retail-to-coal conglomerate Wesfarmers rose 0.7 percent after agreed to sell its Premier Coal business to China's Yanzhou Coal Mining Company Limited for A$296.8 million ($296 million).
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