Hopes of European bank rescue bolsters market

The local bourse was up more than 1 per cent in early trade following a late rally in US stocks triggered by a report about Chinese moves to purchase Italian bonds.

The benchmark S&P/ASX200 index eased back to close 34.2 points, or 0.85 per cent, higher at 4,072.7, while the broader All Ordinaries added 33.3 points, or 0.81 per cent, to 4,158.4. Trading volumes were slightly below average, with turnover of 2.05 billion stocks worth $4.66 billion.

"There's not a huge amount of conviction," said CMC Markets strategist Michael McCarthy.

He said investors were cautiously optimistic about the talks with Italian authorities.

"One of the suggestions that keeps coming up is that there may be appetite from Chinese investment houses to take stakes in European banks," Mr McCarthy said.

As for the impact on the local market, the best performers were energy stocks, with the sector up about 2.8 per cent towards the close, compared to Monday's fall of 5 per cent.

Origin Energy rose 49?, or 3.92 per cent to $13, Oil Search was up 21?, or 3.6 per cent, at $6.05, Santos rose 30? to $11.21 and Woodside gained 57? to $33.14.

The best performing stock on the S&P/ASX100 index was engineering firm WorleyParsons, which provides services to the energy sector. Its shares rose $1.18, or 4.8 per cent, at $25.70.

The worst performer was mineral sands miner Iluka, which fell 47?, or nearly 3 per cent, to $15.26.

Market heavyweight BHP Billiton finished up 84? at $37.29, while fellow mining giant Rio Tinto rose 70? to $68.90.

Construction firm Leighton rose 33? to $18.15 after being awarded a $US300 million road building contract in Oman.

Westfield Group, which is soon to open the doors on its $2.1 billion Stratford City shopping centre in east London, fell 11? to $7.42. The complex will be the largest urban shopping centre in Europe.