Big rally for Australian stocks

The Australian share market has closed at an 11-month high, driven by rallies on banks, mining and defensive stocks.

The benchmark S&P/ASX200 index was up 35.5 points, or 0.79 per cent, at 4514.6 points, while the broader All Ordinaries index had risen 27.2 points, or 0.61 per cent, to 4511.3 points.

On the Sydney Futures Exchange at 1616 AEST, the September share price index contract was 40 points higher at 4511 points, on a volume of 28,795 contracts.

Tuesday's close for the S&P/ASX200 was its highest finish since October 6, 2008 when the index closed at 4540.4

CommSec market analyst Juliette Saly said there was strong trading in bank stocks amid speculation they could raise interest rates irrespective of any future move by the Reserve Bank of Australia (RBA).

The RBA on Tuesday kept the cash rate unchanged at three per cent, a 49-year low, at its board regular monthly board meeting.

"There's still some positive momentum from ANZ's trading update yesterday and it's doing particularly well today," Ms Saly said.

ANZ had surged 71 cents, or 3.33 per cent, to $22.00, National Australia Bank was up 71 cents, or 2.49 per cent, at $29.19, Westpac had added 48 cents, or 1.97 per cent, to $24.85, and Commonwealth Bank had gained 31 cents to $46.31.

Ms Saly said major mining stocks retraced in late trade after a shaky start.

BHP Billiton rose 49 cents to $37.29 and Rio Tinto had jumped $1.25, or 2.23 per cent, to $57.36.

"BHP has received a broker upgrade and UBS has also upgraded its forecast for commodities, so both BHP and Rio are riding high on the back of that," Ms Saly said.

Ms Saly said defensive stocks such as Telstra and Woolworths had been traded heavily.

Telstra inched two cents higher to $3.28 after 66 million of its shares changed hands, while Woolworths had appreciated 58 cents, or 2.07 per cent, to $28.60.

Woolworths' rival and Coles owner Wesfarmers put on 45 cents, or 1.79 per cent, to $25.58.

Making headlines on Tuesday, Nexus Energy says it will conduct a capital raising to allow it to complete its Longtom gas project in Victoria but did not specify the quatum to be raised.

Shares in Nexus were steady at 39.5 cents.

Australia's largest airline Qantas said it had increased passenger numbers in July, compared to the same month last year, by heavily discounting tickets.

Qantas shares were three cents weaker at $2.50.

Oil stocks were mixed after the crude oil price settled at US$69.96 on the New York Mercantile Exchange overnight, the first time oil has ended a trading day below US$70 in about a fortnight.

Locally, Oil Search advanced six cents to $6.33, Santos had inched two cents lower to $15.78, and Woodside had given up 45 cents to $48.55.

Gold stocks were lower. Lihir slipped one cent to $2.76, Newcrest was down 26 cents at $29.75 and Newmont was three cents weaker at $4.85.

The spot price of gold in Sydney at 1629 AEST was US$954.30 per fine ounce, down five US cents on Monday's closing price of US$954.35.

- AAP