The benchmark S&P/ASX200 index was up 81 points or 2.31 per cent at 3591.4, while the broader All Ordinaries index had risen 83.2 points or 2.41 per cent to 3535.7.
IG Markets institutional dealer Chris Weston said positive sentiment surrounding the proposed bailout of US car makers helped to push energy stocks higher.
News that liquefied natural gas producers had won emissions trading concessions from the Australian government helped to drive the resources sector higher, he also said.
"Under the scheme, the producers potentially could get free permits, (the uncertainty) had previously caused companies to halt investment in new projects,'' Mr Weston said.
"That may reduce the cost to their business when carbon trading becomes standard,'' Mr Weston said.
The resource sector was a major buoy for the market.
Rio Tinto jumped 10.19 per cent to $39.90 and BHP Billiton leapt 7.22 per cent to $30.90.
"Rio Tinto brushed off reports that it is in talks to raise $US9 billion ($13.4 billion) in an equity raising exercise in the first half of 2009,'' Mr Weston said.
He said BHP, which is in a strategic stage in contract negotiations with Chinese steel mills, followed Rio higher.
The energy sector was also boosted with all the major players posting gains.
Woodside Petroleum was up $2.43 at $35.49, Santos jumped 53 cents to $15.00 and Oil Search gained 28 cents to $4.86.
The big retailers were also higher at the close.
Coles owner Wesfarmers was up 5.74 per cent to $16.20 while rival Woolworths had added 31 cents 1.24 per cent to $25.31.
In media stocks Fairfax gained 2 cents to $1.50 and News Corporation (the parent company of the publisher of news.com.au) was up 22 cents to $12.92.
On the Sydney Futures Exchange at 4.15pm (AEDT) the December share price index contract was 51 points higher at 3588 on a volume of 68,642 contracts.
Shares open higher on resource gains
Markets are battered again
