The Commonwealth Bank advanced 6.7%, or $2.65, to $42.20, NAB was up 7.7%, or $1.60, to $22.40 and Westpac surged 9%, or $1.81, to $22..

Among the smaller banks, St George also jumped 9.8%, or $2.47, to $27.66.

Suncorp-Metway fell 2.4%, or 22 cents, to $9.05 after announcing that it was reconsidering the sale of assets, reversing early gains.

Bank of Queensland was up 13%, or $1.40, to $12.40.

Macquarie Group jumped 11%, or $3.23, to $31.75 and Babcock & Brown was up 27%, or 27.5 cents, to $1.285.

Economic signals

Economic figures out today, though, underscore the fragility of domestic demand.

Jobs advertised online and in newspapers fell 1.4% in September, for the fifth consecutive month, according to the ANZ Bank.

"Heightened financial market volatility, falls in global equity and commodity prices, and uncertainty over the global economic outlook have intensified over the past month," ANZ economist Warren Hogan said in a release.

"ANZ has revised forecasts for unemployment in Australia and now expects the unemployment rate to rise to around 5.75% over the second half of 2009."

Official unemployment figures out last week showed the largest number of full-time job losses in more than two years, with the jobless rate rising to 4.3%.

Finance data, also out today, showed an across-the-board drop in August.

Total personal finance commitments fell 5.2%, seasonally adjusted, from July, while total commercial finance slumped 7.9% to $29.57 billion, the Australian Bureau of Statistics said.

Housing finance for owner occupation also dropped 2.1% to $12.123 billion from July.

Fickle investors

With such economic gloom spreading, analysts cautioned that the morning's strong rallies may fizzle.

"There's a good chance it will head down again," said James Drohan, private client adviser, at Ord Minnett. "I don't think there has been enough definitive action by global leaders to give investors the confidence that they are looking for."

Mr Drohan pointed to falling commodities prices as evidence of the negative view that has pervaded markets.

So far today, however, relief that economies may be perked up by the European and other coordinated effort is bolstering stocks of the biggest miners.

BHP Billiton gained 8.2%, or $2.26, to $30 and its takeover target Rio Tinto gained 8.7%, or $6,36, to $79.36, its high for the day.

Woodside Petroleum was down 1%, or 39 cents, at $36.81. Rival energy company Santos was also lower, falling 1%, or 13 cents, to $12.21.

Gold miner Lihir lost 2.8%, or 7 cents, to $2.42 but Newcrest gained 7.2%, or $1.85 cents, to $27.49.

The retailers were mixed, with Wesfarmers losing 2.5%, or 53 cents, to $21.22 after earlier trading 5% higher, Woolworths was up 5.4%, or $1.36 cents, to $26.36, its high for the day. Harvey Norman lost 0.8%, or 2 cents, to $2.58.

One of the biggest swings in the market was Valad Property Group, which ended the day up 15%, 1.2 cents, at 9.5 cents.

Global recession ahead

As investors look beyond the flurry of rescue packages and deposit guarantees, they will have to take into account the impact of much slower growth on companies' profits, analysts said.

"The current debacle is going to drive the global economy into recession," said TD Securities global strategist Stephen Koukoulas in a note to clients over the weekend.

The pace of banking activity is set to slow as the rescues devised hashed out by governments start to take financial institutions under their control.

The International Monetary Fund already cut its 2009 global growth forecast to 3%, the lowest in seven years, down from a 3.9% expectation in July.

Weaker lending will take the edge off economic expansion by making financing for businesses harder to attain. With companies unable to take out the loans needed to fund their plans, investors will begin to see smaller returns.

"The newly nationalised banks are likely to err on the side of tight credit facilities, a conservative approach to lending and there are likely to be some sort of limits of the quantity of credit to even those judged to be the very safest counterparties," said Mr Koukoulas.

"To be sure, there will be some lending, borrowing, saving and investing, but the scope of all of these is much narrower, the consequence of which is a weak economic performance."