Market in big gains on a positive outlook

The Australian sharemarket soared to its best day in 19 months after the Reserve Bank left the door open for further rate cuts given that the dollar remains too high for comfort.

The benchmark S&P/ASX 200 posted its best day since December 2011, jumping 123.7 points, or 2.6 per cent, to 4834. The broader All Ordinaries recorded its best day since October 2011, rising 120.6 points, or 2.6 per cent, to 4810.3.

The rally added about $35 billion to the market's value.

Every major sector ended the day more than 1.5 per cent higher. Long-suffering goldminers earned some reprieve, surging 6.9 per cent, while materials jumped 3.7 per cent.

The gains follow Monday's heavy losses, which saw the ASX 200 fall to its worst start to a financial year since 2009-10.

Tuesday's session started on a bright note after overnight data showed US manufacturing had rebounded to a three-month high in June.

Patersons Securities strategist Tony Farnham said the results - as well as an across-the-board jump in commodity prices - will help boost resources stocks.

Iron ore nudged up to $US116.90 ($127.20) a tonne, aiding Fortescue's 5.8 per cent push to $3.12. BHP rose 3.7 per cent to $32, while Rio Tinto pushed up 2.6 per cent to $53.

The market added to its early gains when the Reserve Bank left the cash rate steady, but said it still had scope for further rate cuts and noted the dollar could fall further.

This helped boost local shares as further falls in the Australian dollar would help many struggling domestic businesses.

IG Markets strategist Stan Shamu said the RBA expected the dollar to continue to fall, which would be positive for many sectors of the economy. "It feels the Australian dollar will depreciate further over time, which would help foster a rebalancing of growth in the economy," he said.

Mr Farnham said that while Tuesday was extremely positive, investors still faced unpredictable times. He said: "There is certainly a lot of volatility in the market, especially in the US markets."

Among the banks, ANZ and Commonwealth both jumped more than 2 per cent to $28.48 and $68.90 respectively. Westpac gained 1.6 per cent to $28.42 and NAB lifted 1 per cent to $29.26.

CIMB's Justin Gallagher said while there was strong support across the market, volumes were very thin.