Australian stocks gained more than one per cent on Monday, with market sentiment driven by growing expectations that the Reserve Bank of Australia (RBA) will leave interest rates unchanged at its monthly board meeting on Tuesday.

The benchmark S&P/ASX200 index was up 48.1 points, or 1.07 per cent, at 4,541.6 points, while the broader All Ordinaries index had risen 47 points, or 1.04 per cent, to 4,554.4 points.

On the Sydney Futures Exchange, the September share price index contract was 52 points higher at 4,516 points, with 20,878 contracts traded.

The market opened up about 0.6 per cent higher and extended those gains through the morning, thanks to the strong performance of the materials and financial sectors and despite a flat lead from Wall Street. On the day, about nine stocks rose for every five that ended lower.

The best performing stock on the S&P/ASX50 was Newcrest Mining, having risen 2.78 per cent, or 91 cents, to $33.62. Fellow gold miner Lihir was the third-best performer having climbed 2.7 per cent, or 11 cents, to $4.18.

The spot price of gold in Sydney was $1,183.30 per fine ounce, up $13.45 on Friday's close of $1,169.85. At the close, there were only three stocks in red figures on the S&P/ASX50 WorleyParsons fell eight cents to $23.06, Foster's Group slipped one cent to $5.75 and Woolworths eased two cents to $25.77.

Among financial stocks, ANZ ended up 27 cents at $23.32, CBA rose 85 cents to $53.41, NAB was 18 cents higher at $25.31 and Westpac advanced 21 cents to $24.20.

In the telco sector, Telstra gained five cents to $3.27, despite announcing after the market closed on Friday the company would incur a non-cash impairment charge of $170 million on the carrying value of its Hong Kong based mobile phone telco CSL New World. Optus owner SingTel finished up three cents at $2.56, while Hutchison ended down two-tenths of a cent at 9.7 cents.

In the retail sector, David Jones closed lower after the department store owner confirmed a current employee, Kristy Fraser-Kirk, had filed legal proceedings in the Federal Court against the company.

Ms Fraser-Kirk is suing the department store, nine directors and former chief executive Mark McInnes for $37 million.

David Jones said in a statement it would vigorously defend the sexual harassment claims. The stock closed down four cents at $4.76. Among the other retail stocks, Myer ended flat at $3.45, while JB Hi-Fi closed up 25 cents at $19.39.

Making news on Monday, Aevum shares soared after the retirement village provider rejected a $266 million cash takeover proposal from real estate group Stockland. Aevum jumped 41.74 per cent, or 45.5 cents, to $1.545, while Stockland ended up five cents at $3.84.

Among the big miners, BHP Billiton closed 18 cents firmer at $40.30, while Rio Tinto advanced 54 cents to $71.15. Fortescue Metals was 11 cents higher at $4.40.

The top traded stock by volume was Datamotion Asia, with 59.36 million shares worth $59,360 changing hands.

Datamotion ended steady at 0.1 of a cent. The company issued its fourth quarter cash flow report after the market closed on Friday. Preliminary market turnover was 1.49 billion securities worth $3.29 billion, with 663 stocks up, 377 down and 358 unchanged.

The Australian dollar rallied to a fresh 3 month high in Asia Monday buoyed by a combination of factors that included relief that crucial Chinese manufacturing data Sunday wasn't as bad some expected.

Thin market conditions due to the holiday closure of banks in New South Wales state also allowed the Australian dollar to rise, while weakness in the U.S. dollar gave the currency added oomph.

Australian government bonds were weaker as stronger equity markets in Asia prompted some selling, with traders also awaiting the outcome of the Reserve Bank of Australia's policy meeting on Tuesday.

A survey of 18 economists by Dow Jones Newswires Friday showed all of them expect the RBA to keep its cash rate target on hold at 4.50% for a third month. The Australian dollar was quoted at $0.9100, up from $0.8989 late Friday. Against the Japanese yen, the Australian dollar was at 78.79, up from 77.705.