Upwards and onwards but investors are wary

However, investors remained unsure whether a solution to the crisis could be found amid conflicting media reports. IG Markets' dealer Chris Weston said the local market was "delicately poised".

Investor confidence that Europe would announce fresh measures to stave off contagion of a Greek default, including expanding its European Financial Stability Fund, unravelled somewhat, he said.

The benchmark S&P/ASX200 index rose 34.9 points, or 0.87 per cent, to close at 4039.5, while the broader All Ordinaries index put on 34.2 points to 4097.7.

Patersons Securities associate director John Curtin said a rise in commodity prices overnight had kept the market in recovery mode after last week's massive losses.

Consumer discretionary stocks led the market, closing 1.4 per cent higher, with department store giant David Jones gaining 4.6 per cent to $2.93 and fellow retailer Myer rising 4.5 per cent to $2.10.

There were broad-based gains across all sectors except for health care stocks, which lost 0.2 per cent. Energy stocks rose 1.4 per cent after world oil prices soared on Tuesday night, mirroring gains on world equity markets. Woodside Petroleum gained 3.5 per cent, or $1.08, to $31.94 and Santos added 3? to $11.06.

But RBS Morgans senior equities adviser Geoff Voller said trade had been sluggish and volumes relatively light given a strong lead from global markets overnight.

Turnover was 2.22 billion shares changing hands for $6.03 billion, with almost seven of every 10 stocks rising. "It was a bit of a disappointing reaction but given the uncertainty in Europe I suppose it's not too surprising," he said.

"There's just no real volume or confidence in the market," he said.

Chemical manufacturer Orica's shares jumped 3.7 per cent to $23.20 despite higher than permitted mercury vapour levels being detected around its Sydney plant.

Drilling services group Boart Longyear was the best performing stock, gaining 6.1 per cent to $2.80 while Fortescue Metals was the worst, losing 7.9 per cent to $4.52.