Fortescue Metals shares surged almost 10 per cent as ASX investors bought iron ore miners on the prospect of stimulus for a slowing Chinese economy.
BHP and Rio Tinto each gained about four per cent on Tuesday while energy and property shares also played key roles in the market closing higher.
Iron ore miners were the most significant contributors and Burman Invest chief investment officer Julia Lee said there was more happening than higher prices for the steel-making commodity.
"What's behind the rally in iron ore is China hinting at further stimulus," she said.
China's premier said Beijing should step up efforts to stabilise key economic areas. Analysts said the commentary set the stage for monetary and credit easing.
Ms Lee said stimulus was also possible in Europe, where higher coronavirus infection rates are prompting lockdowns.
"We're probably going to see a slower half in Europe with the COVID situation, so hopefully there is more support for the economy," she said.
Rates and inflation will be in focus on Wednesday when the Reserve Bank of New Zealand board meets.
Analysts are tipping another hike to slow inflation after the central bank in October raised the cash rate by 0.25 per cent to 0.5 per cent.
Expectations of higher rates and a negative lead from the Nasdaq contributed to falls in ASX technology shares.
Afterpay and WiseTech Global each lost more than five per cent.
The benchmark S&P/ASX200 index closed higher by 57.5 points, or 0.78 per cent, to 7410.6 points.
The All Ordinaries closed up 53.4 points, or 0.69 per cent, to 7741.7 points.
US markets closed mostly lower despite rallying on news that US President Joe Biden reappointed Jerome Powell as chair of the Federal Reserve.
On the ASX, investors liked Woodside confirming it would go ahead with a share sale to buy BHP's oil and gas portfolio.
Woodside will also go ahead with its $16 billion Scarborough gas project off the West Australian coast.
Woodside shares were up 3.46 per cent to $22.45.
Banks had a better day. ANZ was best and climbed almost two per cent to $27.27.
Goldminer Northern Star is buying Newmont Australia's power business for about $131 million.
The purchase will give the miner greater control over its power supply in Kalgoorlie in Western Australia.
Shares were down 2.68 per cent to $9.79.
Santos' gas joint venture Tamboran Resources has raised $35 million through a private share sale.
US investor Bryan Sheffield contributed $20 million of the amount to help develop wells in the Northern Territory.
Santos shares were up 2.12 per cent to $6.74.
Family software vendor Life360 is buying tracking device vendor Tile for about $282 million.
To fund the purchase, Life360 will raise about $280 million by selling CHESS depositary interests.
Shares last traded for $13.51 before being paused for the equity raising.
Buy now, pay later provider Laybuy lowered its full-year sales forecast after revenue in its main UK market did not meet expectations.
The company has revised revenue growth to between 60 and 70 per cent.
Shares were down 9.5 per cent to 38 cents.
The Australian dollar was buying 72.15 US cents at 1728 AEDT, lower from 72.51 US cents at Monday's close.
ON THE ASX
* The benchmark S&P/ASX200 index closed higher by 57.5 points, or 0.78 per cent, to 7410.6 points on Tuesday.
* The All Ordinaries closed up 53.4 points, or 0.69 per cent, to 7741.7 points.
* At 1728 AEDT, the SPI200 futures index was down seven points, or 0.09 per cent, at 7401 points.
One Australian dollar buys:
* 72.15 US cents, from 72.51 cents on Monday
* 83.04 Japanese yen, from 82.77 yen
* 64.23 Euro cents, from 64.32 cents
* 53.90 British pence, from 53.95 pence
* 104.13 NZ cents, from 103.47 cents.