American stock markets strengthened overnight with the Dow Jones Industrial Average closing up 36 points, or 0.2 per cent on the back of higher oil prices.

The Australian market opened stronger with the All Ordinaries index up 0.2 per cent to 5168.6 points.

The Australian dollar was worth 74.83 US cents after trading at a fresh eight-month high above 75 US cents overnight.

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The S&P 500 Index added 10 points, or 0.5 per cent, to 1,989, and the Nasdaq rose 25 points, or 0.6 per cent, to 4,674.

A bigger-than-expected fall in gasoline inventories and few surprises from figures on US crude stockpiles helped to push Brent crude above $US40 a barrel.

Analysts say the advance in oil prices was helping to offset ongoing concerns about China’s economic growth, and the prospect of higher interest rates in the United States.

Elsewhere, biotechnology shares came under pressure because of a US government health agency proposal that would change the way Medicare compensates doctors who administer vaccines in their offices.

Firmer oil prices also lent support to European markets and, in London, the FTSE 100 rose 0.3 per cent to 6,146.

On the cross-rates, it was buying 68 euro cents, 52.61 British pence, 84.88 Japanese yen and $NZ1.12.

West Texas crude oil had increased to $US37.57 a barrel, the price of a barrel of Tapis had also risen to $US42.95 and spot gold had eased to $US1,250.81 an ounce.

New Zealand’s Reserve Bank has made a surprise cut of 25 basis points to the country’s cash rate, taking it to a record low of 2.25 per cent.

In a statement, the central bank said that the outlook for the global economy had deteriorated since December, due to weaker growth in China and slower growth in Europe.

Economists had broadly expected New Zealand’s cash rate to be left on hold this month.

The unexpected move prompted a 1 per cent fall in the New Zealand dollar to 66.43 US cents.