The S&P/ASX200 rose 112.9 points on Monday, up 1.29 per cent, to 8,888.4, as the broader All Ordinaries gained 111.6 points, or 1.23 per cent, to 9,180.4.
The rebound followed a decent Wall Street session after US manufacturing data surprised on the upside, indicating an expansion in the sector not seen since 2022.
US President Donald Trump also announced a trade de-escalation with India, further bolstering sentiment.
Locally, all eyes are on the Reserve Bank Australia ahead of its first interest rate decision for the year, following multiple hotter than expected inflation surprises in recent months.
"The Australian interest rate market starts the day with 19 basis points (a 76 per cent probability) of a 25 basis point rate hike built in for this afternoon's meeting," , IG market analyst Tony Sycamore said.
"Mindful that the RBA never hikes just once, the market is pricing in a second 25 basis point RBA rate hike by September 2026."
The basic materials sector led ten of 11 local sectors higher in early trade, bouncing 2.2 per cent after dropping more than six per cent in the previous two sessions.
The segment has been on tear, soaring more than 50 per cent higher in seven months as technological advancement and geopolitical concerns drove demand for scarce strategic commodities.
Gold appeared to find a temporary bottom after plunging into a technical bear market (falling 20 per cent or more from recent highs) on Monday, recovering to $US4,828 ($A6,931) after falling from a record $US5,595.
Evolution and Newmont each jumped more then fiver per cent, while sub-sector giant Northern Star rose 3.3 per cent to $27.47.
Iron ore giants Rio Tinto and BHP also rebounded more than 1.8 per cent each, but iron ore futures are hovering at three month lows after fading from seasonal highs since mid-January.
A US plan to launch a $US12 billion ($A17 billion) critical minerals stockpile to lessen dependence on China, supporting US rare earths stocks.
Locally, Lynas Rare Earths shares rallied 4.8 per cent to $15.48, while Liontown and PLS also pushed higher.
Modest gains for the big four banks helped push the financials sector 0.8 per cent higher, tracking with similar gains for NAB, Westpac and CBA, as the latter flagged $121 million in items impacting its incoming first half financial report due on February 11.
Energy stocks traded just below flat as oil price hovered after dipping on Monday on signs of a US-Iran nuclear deal.
IT stocks jumped 2.4 per cent, tracking a boost on the Nasdaq with a broad-based rally after some better than expected US tech earnings.
Consumer-facing sectors also performed well, with staples up 0.9 per cent and cyclicals gaining 1.2 per cent.
In company news, debt collection and lending company Credit Corp tumbled almost 14 per cent after reporting lower than expected first half earnings for its Australian and New Zealand loan book.
Neuren Pharmaceuticals shares dropped 9.9 per cent after its treatment for Rhett syndrome received a negative regulatory vote in the European Union.
Turning to regulation, Australian Securities and Investments Commission deputy chair Sarah Court will be the first woman to head Australia's corporate watchdog, which has announced she will replace Joe Longo after their current five year terms.
The Australian dollar was buying 69.69 US cents, up from 69.39 US cents on Monday at 5pm, the Aussie lifting ahead of the Reserve Bank's first interest rate decision on 2026.
