Shares ended higher amid expectations debt-heavy Rio Tinto will announce a $30 billion cash injection from Chinese steelmaker Chinalco this afternoon.
The benchmark S&P/ASX200 index closed 1.1% higher, or 39.9 points, to 3514.3, while the All Ordinaries index was up 1.2%, or 40.4 points, at 3458.5.
The Australian dollar was recently buying 65.83 US cents, 59.21 yen and 50.97 euro cents.
IG Markets research analyst Ben Potter said Australian employment figures had been better than expected, with the economy adding 1,200 jobs in January compared with an expected loss of
16,500.
"We've yet to see the wholesale shedding of jobs, which is brilliant news, and may just help Australia skirt a recession,'' Mr Potter said.
"These numbers tell us that things aren't as bad as the media has been portraying.''
All sub-indexes on the market were higher, with the exception of health, which was down 1.3%. The materials sub-index was up 1.4%, with BHP Billiton, up 10 cents, or 0.3%, at $32.47.
Rio Tinto was in a trading halt pending an announcement to the market. They last traded at $52.00 yesterday.
Fortescue Metals was up 14 cents, or 5.8%, at $2.56, while BlueScope Steel was down 11 cents, at 3.2%, at $3.30.
The financials sub-index was up 1.1%.
The Commonwealth Bank rose $1.03, or 3.4%, to $30.95 and ANZ was down 13 cents, or 1.1%, at $11.89.
NAB lost 10 cents, or 0.5%, to $18.60 and Westpac was up 48 cents, or 3%, at $16.651.
Suncorp Metway was flat at $5.70 and investment bank Macquarie Group gained 15 cents, or 0.6%, to $23.40.
QBE Insurance was up 26 cents, or 1.2%, at $22.76 and IAG was up 14 cents, or 4.2%, at $3.47.
Spot gold was down $US3.33 at $US940.85 an ounce in recent trade.
Lihir Gold was up 26 cents, or 8.2%, at $3.41 and Newcrest rose $1.65, or 5.1%, to $34.00.
The energy sub-index was up 0.5%, with oil futures rising 12 US cents to $US36.06 a barrel in recent trade.
Woodside Petroleum was down 15 cents, or 0.5%, at $32.15, while Santos was up 35 cents, or 2.4%, at $14.90.
AGL Energy added 17 cents, or 1.2%, to $14.37 and Macarthur Coal was down 1 cent at $2.94.
The retailers were mixed. Woolworths was up 1 cent at $27.64, while Wesfarmers was up 28 cents, or 1.8%, at $15.48.
JB Hi-Fi was up 29 cents, or 2.8%, at $10.59.
Harvey Norman was up 6 cents, or 3%, at $2.09 and David Jones was up 8 cents, or 3.6%, at $2.30.
Beverage company Coca-Cola Amatil was up 13 cents, or 1.5%, at $8.51 after this morning reporting a 10% rise in profit. Foster's was up 18 cents, or 3.4%, at $5.45.
Shopping centre operator Westfield was down 23 cents, or 2%, at $11.05 and Centro Retail Group was up 0.3 of a cent at 5.8 cents.
Australia's largest construction company, Leighton Holdings, said it expected to benefit from record work in hand after a 20 per cent lift in its first-half operating profit.
Leighton shares rose $1.06, or 6.1%, to $18.56.
Mr Potter said Leighton's net profit of $111.2 million beat average expectations by about eight per cent or $8.6 million.
"Full year guidance was solid, too, with the firm predicting underlying profit of about $650 million,'' he said.
Among media stocks, Fairfax Media was down 2.5 cents, or 2.2%, at $1.115 and News Corp gained 3 cents, or 0.3%, to $10.79.
West Australian Newspapers was up 2 cents at $4.19 and Ten Network was up 3.5 cent ats 94.5 cents.
The telecoms sub-index was up 1.1%. Telstra gained 4 cents, or 1.1%, to $3.67, while SingTel, owner of Optus, lost 3 cents, or 1.2%, to $2.541.
Qantas was up 2 cents, or 1.1%, at $1.89 and Virgin Blue was down 1 cent at 25 cents.
Among health stocks, CSL was down 83 cents, or 2.3%, at $35.47 and ResMed was up 12 cents, or 1.9%, at $6.46.
Information technology was the best-performing sub-index on the market for a second day, up 4.1%, with ComputerShare gaining 33 cents, or 4.6%, to $7.53.
Gaming company Crown was up 3 cents, or 0.6%, at $5.36 and Aristocrat Leisure lost 5 cents, or 1.3%, to $3.80.
Building materials group James Hardie gained 36 cents, or 11%, to $3.65 despite today reporting a drop in net operating profit for the first nine months of its fiscal year.
PaperlinX shares lost half a cent to 30.5 cents after announcing a 40% drop in half-year profit.
, with