At 10.15am (AEDT), the benchmark S&P/ASX200 index had risen 70.5 points, or two per cent, to 3,604.3, while the broader All Ordinaries was up 64.2 points, or 1.85 per cent, at 3540.7.
On the Sydney Futures Exchange, the December share price index contract was up 65 points at 3621 on a volume of 6330 contracts.
BHP Billiton shares gained 67 cents, or 2.41 per cent, to $28.48, but Rio Tinto shares lost $2.80, or 7.61 per cent, to $34.00.
The banks were in the green. Commonwealth Bank firmed 99 cents, or 3.17 per cent, to $32.19, NAB lifted 61 cents to $19.20, ANZ increased 42 cents to $14.58 and Westpac was up 52 cents at $17.02.
Making news, shares in Babcock & Brown resumed trading after the investment group secured extra funding from its bankers and rearranged aspects of its debt repayment obligations.
At 10.17am (AEDT), B&B was up 28 cents, or 112 per cent, at 53 cents.
US stocks rallied for a second straight day overnight after reports on robust online holiday spending and a surprise jump in mortgage applications offset a batch of dismal economic data.
The Dow Jones Industrial Average powered 2.05 per cent higher to 8591.69.
The Nasdaq composite climbed 2.94 per cent to 1492.38 and the Standard & Poor's 500 advanced 2.58 per cent to 870.74.
Aequs Securities institutional dealer Ric Klusman said the local market was off to a positive start.
"(It's been) a reasonable result, but not as strong as I would have thought," Mr Klusman said.
"People are still concerned that the US is going to roll again after two heavy days up."
Mr Klusman said weaker commodity prices were weighing on Rio Tinto and a lower gold price was dragging Lihir Gold down.
"There was some weakness in commodity prices overnight and that is continuing to put some downward pressure on Rio.
"Also, people are concerned about this debt situation ... that they're alright ..."
Mr Klusman said he was surprised that Babcock & Brown's share price had risen so high.
"I would have thought people would have wanted to take the money and go, 'Just get me out at any price'.
"But I guess they're looking through that to a certain extent and saying, if the banks are prepared to extend them this credit, they must think that the asset value behind it is there to support it.
"I think it's also a little bit of the old adage - if you owe the bank $100 you've got a problem, if you owe the bank a $1 billion, they've got a problem.
"So I think the banks have a vested interest to keep them alive and they believe they do have the assets there to support it - provided they can liquidate it at an (appropriate) time and price."
Among gold stocks, Lihir was six cents lower at $2.28, Newmont was untraded at $4.90 after going ex dividend, and Newcrest eased seven cents to $25.44.
The price of gold in Sydney was $US775.15 per fine ounce, up $US7.10 on yesterday's close of $US768.05.
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