The benchmark S&P/ASX200 index was up 58.3 points, or 0.83 per cent, to 7051. The broader All Ordinaries was up 67.4 points, or 0.93 per cent, to 7306.10.
Sentiment turned positive after a softer-than-expected US inflation report overnight. US consumer prices were unchanged in July, but the result was lower than expectations because of a sharp drop in the cost of petrol, prompting bets of less aggressive rate hikes from the US Federal Reserve.
This led to both the S&P 500 and the Nasdaq indices finishing well above two per cent each.
In the local market, gains were led by materials, financials and health-care stocks.
Three of the "big four" banks rose by nearly one per cent each, a day after top lender Commonwealth Bank lifted its full-year profit. However, CBA slipped by 0.3 per cent to $100.66.
Mining shares saw all-round gains, with top miners BHP and Fortescue Metals up nearly two per cent each, although Rio Tinto dropped 3.2 per cent on trading ex-dividend.
Battery minerals stocks, including Lake Resources, Core Lithium and Pilbara Resources, also performed strongly, rising by 4-10 per cent.
Technology stocks tracked their Wall Street counterparts higher, led by a nine per cent increase in ASX-listed shares of payments giant Block, which owns Afterpay, and a nearly three per cent rise in shares of software maker Xero.
Sonic Healthcare and Cochlear were the best-performing of the health-care stocks, up 2.4 per cent and 1.9 per cent respectively.
In stock-specific news, wealth manager AMP was trading 0.6 per cent lower after a sharp decline in its half-year profit, although the company pledged to return $1.1 billion to shareholders after downsizing and simplifying its business.
Shares in Telstra also gave up much of their early gains, but were still up 0.5 per cent at $4.02 after the telecommunications giant raised its total dividend for the first time since 2015, returning $1.9 billion to shareholders.
Meanwhile, the Australian dollar was buying US70.70 cents at noon on Thursday, sharply higher from US69.66 cents on Wednesday, following a decline in the American currency after the subdued inflation report.
