The Australian stock market posted its strongest day in six weeks, with investor sentiment buoyed by offshore news and a lower than expected flood peak in Brisbane.

The benchmark S&P/ASX200 index was up 71 points, or 1.5 per cent, at 4,795.2 points, while the broader All Ordinaries index was up 69.6 points, or 1.44 per cent, at 4,901.5 points.

On the ASX 24, the March share price index futures contract was 71 points higher at 4,785 points, with 25,843 contracts traded.

The market dominant mining and bank sectors led the gains, but all sectors saw higher prices. Trading volumes were also at their highest since the Christmas holidays.

Mining and metals stocks all closed higher, due to positive leads from offshore commodity and equity markets.

BHP Billiton added 85 cents, or 1.88 per cent, to $46.05 and Rio Tinto gained $1.86, or 2.18 per cent, to $87.05.

Among the banks, ANZ gained 24 cents to $22.96, NAB added 41 cents to $24.20, Westpac rose by 34 cents to $22.32 and Commonwealth Bank closed 78 cents higher at $51.13.

Macquarie Group put on $1.39 to $39.16, while Bank of Queensland lifted 29 cents to $9.89.

Insurers also rebounded from recent losses, with Insurance Australia Group (IAG) adding 11 cents to $3.85, Suncorp gained 18 cents to $8.47 and QBE Insurance rose by 25 cents to $18.40.

Several energy stocks were among the worst performers of the day, with Oil Search down nine cents to $6.91 and Caltex lost 18 cents to $13.96.

Woodside gained seven cents to $43.65, while Santos added 29 cents, or 2.2 per cent, to $13.45 after the firm and its partners gave the final go ahead for the multi billion dollar Gladstone Liquefied Natural Gas (GLNG) project in Queensland.

Funds manager Henderson Group was the best performer among the top 200 stocks, adding 25 cents, or 11.6 per cent, to $2.40, after announcing a takeover of rival London-based Gartmore Group.

Telstra shares added two cents to $2.87.

The spot price of gold in Sydney was $1,385.50 per ounce at, up $1.25 on Wednesday's close of $1,384.25.

The most traded stock by volume was Continental Coal, with 126.9 million shares changing hands for $10.9 million.

Continental Coal shares added 0.6 cents, or 7.32 per cent, to 8.8 cents.

Preliminary national turnover was 2.76 billion shares worth $4.64 billion, with 780 stocks up, 402 down and 341 unchanged.

The Australian dollar recovered part of a week-long drop Thursday as a successful bond auction in Portugal lifted riskier assets, such as the local currency.

Moreover, even as Australian floodwaters continued to drive through Brisbane, threatening thousands of homes in Australia's third-largest city, as well as the state of Queensland's crucial financial, mining and agricultural businesses, safe haven Australian bonds fell.

Helping risk appetite was a drop in the country's unemployment rate, as well as a continued retreat from the dire prognostications of traders in relation to central bank policy earlier this week.

Mostly driving the move into the Australian dollar was an auction of Portuguese sovereign bonds that went slightly better than expected, helping ease concerns about the euro zone's debt problems.

The auction had the Australian dollar reach as high as $0.9971, its highest point since Monday.

The major action, however, came after government data showed Australia's unemployment rate fell to a lower than expected seasonally adjusted 5.0% in December from 5.2% in November as the number of employed rose 2,300.

Economists on average had expected an unemployment rate of 5.1% in December, with the number of employed up 25,000.

With the better-than-expected unemployment rate and fewer than expected job additions counteracting each other, the Australian dollar initially slid, before paring back much of its earlier declines in afternoon trading.

The Australian dollar traded at $0.9952, up from $0.9845 late Wednesday.

Against the Japanese yen, the Australian dollar recently changed hands at 82.64, up from 81.865.

More from IBT Markets:

Subscribe to get this delivered to your inbox daily

Follow us on Twitter.

Follow us on Facebook.