The Australian share market’s benchmark ASX 200 has jumped 2.7 per cent, defying further steep falls in China and across Asia.

The ASX 200 shrugged off an early 1.5 per cent slide on Tuesday morning – which took it below 5,000 points for the first time in more than two years –  to close 136 points higher at 5,137, and the broader All Ordinaries index surged 2.6 per cent to 5,144.

The gains came despite further steep falls on mainland Chinese share markets and around much of Asia.

• Black Monday for global stocks
• Australian shares slump as Chinese stocks plunge

The Shanghai composite index closed down 7.6 per cent at 2,965, while the Shenzen index was also more than 7 per cent off.

Those declines reverberated to a 0.5 per cent decline in Hong Kong and another 4 per cent slump for Tokyo’s Nikkei by the time Japanese markets closed.

It’s been a day of twists and turns on the Australian stock exchange. Photo: ABC

Both those markets had registered gains earlier in the day, before relinquishing them, however China’s mainland markets remained firmly in the red throughout.

However, Australia was not totally alone amongst Asian stock markets in gaining: Singapore’s market was up 0.8 per cent and Malaysia’s 0.9, Korea was also up 0.9 per cent, while Taiwan’s market was up 3.6 per cent.

European markets were also set to gain around 1-2 per cent according to futures trade.

However, few analysts think that the gains will mark the end of market turbulence.

“The recent turmoil has left even the most hardened trader gasping for air, and there’s probably more to come,” wrote Frederic Neumann, HSBC’s co-head of Asian economics research, in a note to clients.

“China’s economy continues to slow and the Fed [US central bank] may still hike rates before the end of the year. That puts further cracks into the two main growth pillars for the world economy of recent years: Chinese demand (including commodities) and easy money.”

Banks lead blue chip stock rally

Many major Australian blue chip companies which were hammered on Monday surged on Tuesday, as ‘bargain hunters’ moved in.

Westpac, which slumped more than 6 per cent on Monday, closed up 4.9 per cent at $30.90, with NAB up 4.6 per cent, ANZ 4 per cent and CBA 3.6 per cent.

BHP Billiton spin-off South32 jumped 8.9 per cent to $1.53 after slumping 7.6 per cent on Monday.

The company that it split from had a more modest 2 per cent rise, ahead of BHP Billiton’s annual profit results, which came out after the share market closed showing an 86 per cent decline on tumbling commodity prices.

Rival Rio Tinto was up 3.2 per cent to $48.45, while battered iron ore specialist Fortescue, which dived nearly 15 per cent on its full-year profit result on Monday, recovered 11 per cent to $1.815.

A very high volume of shares changing hands indicated that the buying had some degree of conviction behind it.

IG’s chief market strategist Chris Weston noted before the market opened on Tuesday that almost 90 per cent of companies were trading below their 50-day average share prices.

The Aussie dollar recovered to be trading a 72.25 US cents.  Photo: Getty 

He said this has led to strong rallies on the five other occasions that has happened since 2007 and was “screaming buy”.

“There seems to be a belief now that the banks have offered that value, we’ve seen a note from UBS as well upgrading CBA to a buy,” he said.

“The banks are absolutely flying, we need to remember as well that they have been heavily, heavily beaten up. The market itself was grossly oversold.”

However, Chris Weston also noted that the local market is seeing some of the highest volatility for several years, as measured by the Australian VIX.

“That’s up 53 per cent today to the highest level since December 2013,” he observed.

“I think that tells you something there – if you’re happy to trade and invest in volatility then this market’s been offering you a gift today.”

He also warned that it may not be a gift that keeps on giving to share investors who buy in.

“The question is will this continue to move up or is this a dead cat bounce within a very aggressive sell-off we’ve been seeing,” Mr Weston cautioned.

The Australian dollar also pulled back from overnight falls to as low as 70.37 US cents, trading at 72.25 US cents by 12:35pm.

-ABC