Australian shares rose for the second day to a three-week high after strong economic data from the United States and Europe kicked off the year.
Local shares got a boost after strong gains in US equities as manufacturing and construction in the world's largest economy expanded at a faster pace than analysts had predicted.
Investors, keen to shrug off the gloom of 2011, also cited market-beating manufacturing data from China and a fall in unemployment in Germany as signals that the global economy may bounce back this year.
"Traders seem to have entered 2012 recharged, optimistic and seemingly ready to see the world through fresh eyes," IG Markets' Chris Weston said.
"The risks are still very real despite a good start to 2012, but the tape for the time being looks positive and this will encourage further short covering."