The benchmark S&P/ASX 200 added 47.68 points, or 0.9 per cent, to 5319.4. The broader All Ordinaries gained 47.23 points, or 0.9 per cent, to 5307.3.

Across the Asia-Pacific region, markets were up after a recovery on Wall Street on Friday where robust US economic data lifted investors spirits.

Japan's Nikkei Index rallied nearly 4 per cent on Monday, posting its largest one-day gain since June 2013. Media reports suggested that Japan's $US1.2 trillion government retirement fund will increase its allocation target for shares to 25 per cent from 12 per cent.

The bounce back on the Australian market was broad-based, with financials leading the way.

Commonwealth Bank of Australia lifted 0.9 per cent to $77.26, while Australia and New Zealand Banking Group jumped 1.6 per cent to $32.45. Westpac Banking Corp rose 1.4 per cent to $33.57 and National Australia Bank pushed 0.9 per cent higher to $33.44.

After the ASX 200 narrowly avoided a correction earlier this month, it was no surprise that the market bounced back a bit, Perpetual head of equities research Matt Sherwood said.

"The market was ripe for a correction anyway given the massive run up we had and we haven't had a correction in over 800 days – that's unusually long," Mr Sherwood said.

Despite amplified volatility over the past month, concerns about global growth. at least in the US, had been overstated.

"[The US doesn't] have indicators of an economy that requires zero interest rates. In the end, I still think that the Fed will move rates higher in the September quarter next year," Mr Sherwood said.

JBWere executive director Mike Kendall agreed the correction was not unexpected and now investors were returning to the market looking for value.

"Particularly when you see yields well back into the 6 per cent mark plus franking, for a lot of investors that's pretty attractive when deposit rates are so low," Mr Kendall said.

While the US economy may be improving, Australia faces the prospect of further falls in the price of iron ore, according to ratings agency Moody's.

Iron ore has fallen about 40 per cent in 2014 but with global steel production growth in China relatively flat a rebound in the price is seen as unlikely.

"Downward rating actions for iron ore producers could result as Moody's reassesses the impact of a protracted pricing weakness," Moody's said.

Iron ore inched 0.6 per cent higher overnight on Friday to $US80.52 per tonne.

BHP Billiton jumped 1.3 per cent to $33.84, while rival Rio Tinto rose 0.6 per cent to $59.73. Fortescue also added 0.6 per cent to $3.46.

Shares in Arrium lifted 1.5 per cent to 34¢ following the miner's September quarterly production reported which shows it shipped a record amount of iron ore in the period.

The prospectus for healthcare provider Medibank was released on Monday, with the government set to reap up to $5.5 billion from the initial public offering. The shares will be sold between $1.55 and $2.00.

Ten shares surged 7.3 per cent to 22¢, following reports that Gina Rinehart, who owns 10 per cent of the struggling broadcaster, is planning to leave the board of directors. It comes amid a raft of takeover and merger talks involving the network.

The board of contractor Transfield Services advised its shareholders to ignore a cash takeover bid from Spanish infrastructure group Ferrovial Servicios, which offered $1.95 per share, valuing the company at $1 billion. Transfield shares shot up 26.7 per cent to $1.90.

Downer EDI purchased contractor Tenix for $300 million sending Downer shares up 3.5 per cent to $4.19. Downer said the Tenix business would be earnings accretive in the first year.

Sydney Airport's international passenger numbers fell last month, with analysts believing it is a sign of the weaker Australian dollar hitting those with plans to travel overseas. The airport reported 1.2 per cent fall in international passengers. The company's share price finished the day flat at $4.22.