The S&P/ASX200 rose 87.7 points, or one per cent, to 8,826.5, as the broader All Ordinaries gained 81.3 points, or 0.9 per cent, to 9,091.4.
The recovery came after a spike in bond yields caused the top-200 to slump 1.8 per cent on Wednesday in its worst session since April 9, in the days after US tariff announcements roiled global markets.
"The ASX200 has rebounded above 8800 today, recovering half of the ground it lost in yesterday's day of carnage that wiped approximately $53 billion from the market cap of the local bourse," IG Markets analyst Tony Sycamore said.
"(It) followed a positive session on Wall Street as soft US jobs data and dovish Fed speak doused flames in bond markets threatening to burn out of control."
Nine of 11 local sectors traded higher on Thursday, led by strong rebounds in interest rate-sensitive sectors such as financials (+1.7 per cent), IT stocks (+1.3 per cent), real estate (1.1 per cent) and consumer-facing segments.
The big four banks helped lift the bourse, with CBA, Westpac and NAB all notching gains of two per cent or more, along with investment giant Macquarie Group.
Insurance Australia Group slipped 0.3 per cent to $8.65, after the competition watchdog raised concerns about the insurer's planned takeover of Royal Automobile Club of Western Australia's insurance arm.
Xero helped boost the IT sector, the accounting software company clawing back 4.8 per cent to $157 a share after slipping more than six per cent on Wednesday.Â
Megaport and data centre play NextDC swung the other way, shedding 6.3 per cent and 2.4 per cent.
The rebound in real estate stocks was supported by strong performances by Goodman Group, Scentre and Vicinity Centres.
Australia's mining sector finished slightly lower by the close, despite solid gains for Fortescue and Rio Tinto as iron ore futures rose above $US104 per tonne, but BHP fell 0.7 per cent.
Gold miners generally faded as the precious metal eased after hitting a fresh peak of $US3,578 ($A5,484) an ounce overnight, before slipping to $US3,537 on Thursday.
Energy stocks steadied after a weak start to the session to close 0.1 per cent stronger, as sector giants Woodside (-0.7) and Santos (+0.3 per cent) largely stood their ground against a three per cent slump in oil prices linked to foreshadowed OPEC production hikes.
Woolworths helped lift consumer staples stocks, clawing back 1.7 per cent to $27.67, but still a long way from its pre-earnings price above $33 a share.
Bunnings owner Wesfarmers drove the push in the consumer discretionary sector with a 2.5 per cent lift to $90.91, but was also reclaiming lost ground after a reporting season sell-down.
The Australian dollar is buying 65.24 US cents, up slightly from Wednesday afternoon's 65.11 US cents, but ultimately trading at the higher end of the range it has held with the greenback since late May.
ON THE ASX:
* The S&P/ASX200 rose 87.7 points on Thursday, or one per cent, to 8,826.5
* The broader All Ordinaries lifted 81.3 points, or 0.9 per cent, to 9,091.4
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 65.24 US cents, from 65.11 US cents on Wednesday
* 96.69 Japanese yen, from 96.77 Japanese yen
* 55.99 euro cents, from 55.98 euro cents
* 48.56 British pence, from 48.67 British pence
* 111.19 NZ cents, from 111.24 NZ cents
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