KEY POINTS:
MELBOURNE - The Australian sharemarket took a big leap forward today, emulating US markets that were boosted by a major cut in interest rates.
The interest rate cut eased fears that defaults in the US sub-prime mortgage market and a consequent credit squeeze would spill over into the broader economy.
Locally, most stocks lifted, with the big miners, gold stocks and major banks all making solid gains.
ABN Amro Morgans private client adviser Simon Ferguson said the rate cut in the US and commentary by the US Federal Reserve on the prospects of further rate cuts had especially helped stocks in the financial sector.
"Those stocks that had been hit hardest earlier in the week - the financials and the banks - are probably the ones that have rallied most," Mr Ferguson said.
"You've got on top of that good metals prices."
Mr Ferguson said that although the market had rallied strongly today, it was expected to still be volatile for some time as further issues in the US sub-prime mortgage market became apparent in coming moths.
"Today's a good day, but the trend is not there," Mr Ferguson said.
At the 1615 AEST close, the S&P/ASX200 index was up 163.6 points, or 2.64 per cent, to 6356.1, and the All Ordinaries rose 154 points, or 2.48 per cent, to 6362.0.
On the Sydney Futures Exchange, the September share price index contract at 1615 AEST was 156 points stronger at 6358, on a volume of 79,024 contracts, according to preliminary calculations.
In the main company news of the day, food and liquor retailer Coles Group reported a 35.7 per cent fall in annual net profit as it prepares for a takeover by Wesfarmers Ltd.
Coles shares were up 15 cents at A$15.00.
Coles' supermarket rival, Woolworths, was 31 cents richer at A$29.89.
Among the major banks, the National Australia Bank rose 95 cents to A$38.20, ANZ lifted 77 cents to A$28.57, Westpac added 65 cents to A$27.45, and Commonwealth Bank gained 87 cents to A$55.87.
Investment bank Macquarie Bank was A$3.74 heavier at A$77.10, and investment group Babcock & Brown stepped forward A$1.16 to A$24.26.
In the resources sector, global miner BHP Billiton was A$1.79 richer at A$40.44, and Rio Tinto found A$4.28 at A$101.79.
Oil and gad producer Woodside Petroleum was up A$1.50 at A$47.35, and Santos ascended 55 cents to A$14.20.
In the gold sector, Newcrest surged A$1.76 to A$28.06, and Lihir was up 29 cents at A$3.79.
The price of gold in Sydney at 1620 AEST was USA$725.00 per fine ounce, up USA$8.60 on yesterday's close.
On Wall Street overnight, the Dow Jones industrial average surged 335.97 points to 13,739.39.
In the media sector, News Corp rose 24 cents to A$26.60 and its non-voting stock added 20 cents to A$25.05.
Publishing and Broadcasting improved 45 cents to A$18.44, and Fairfax formed five cents to A$4.47.
Among the telcos, Telstra was five cents better off at A$4.39, and Optus-owner Singapore Telecommunications found 11 cents at A$3.09.
SP Telemedia dipped seven cents to 45.5 cents, as it said it was prowling for new acquisitions and would not rule out building new networks, after selling its television interests.
Among other stocks, Queensland Gas Company rose 10 cents to A$2.40 after posting a loss in its first full year of production but said it was well positioned for growth.
Property company Cromwell Group was steady at A$1.26 as it dismissed speculation it is a potential buyer for Mirvac Real Estate Investment Trust.
Online sports betting company Marginbet finished its first day of trading at 17 cents - three cents below its issue price.
The top traded stock by volume was petroleum and gas explorer Empire Oil & Gas, with 97.9 million shares worth A$2.68 million changing hands.
Empire was up 0.2 cents at 2.8 cents.
Preliminary national turnover was 1.73 billion shares worth A$7.34 billion, with 829 stocks up, 425 down and 319 unchanged.
-AAP