The Australian sharemarket rebounded from a $63 billion wipeout as bargain hunters piled back into equities after strong US economic data kept the possibility of rate cuts on the cards.

The S&P/ASX 200 Index was up 40.20 points, or by 0.5 per cent, at 8941.40 at 12.03am AEDT, having traded as high as 8964.10 points in the morning session, buoyed by a strong rally on Wall Street overnight.

Stocks were sold off around the world on Wednesday, sending the ASX 200 diving 1.9 per cent, amid fears of a protracted war in Iran that will keep oil prices elevated and reignite inflation.

But strong US economic data – including private payrolls and the ISM Services Index – eased some of those fears and kept hopes of rate cuts from the Federal Reserve alive.

Reports that Iran had approached the US to resolve the escalating conflict in the Middle East also helped sentiment before Iran denied the speculation.

“The situation remains chaotic, fluid and at risk of further escalation, with no clear off-ramp for either side in sight yet,” said Capital.com senior market analyst Kyle Rodda. “It’s likely to mean continued volatility as the markets try to price in the scale of the energy shock and how it will impact inflation.”

On the ASX, rate-sensitive technology stocks were the biggest risers, buoyed by strong overnight gains on the Nasdaq. WiseTech Global rose 5.8 per cent, Xero 3.1 per cent and NextDC 5.1 per cent.

Investors also returned to the major banks with ANZ gaining 0.6 per cent, Commonwealth Bank 1.2 per cent, Westpac 1.4 per cent and National Australia Bank 2.1 per cent.

Energy was the weakest sector after Woodside lost 2.1 per cent as it traded ex-dividend and Santos dropped 1.2 per cent after Brent stabilised overnight at around $US81.40 a barrel.

Miners were also down as BHP retreated 1.3 per cent after it traded ex-dividend. Iron ore neared $US100 after a 1.2 per cent bounce, which helped Rio Tinto add 0.6 per cent and Fortescue 1.7 per cent.

Gold miners also remained under pressure as the precious metal traded at $US5175 an ounce. Newmont lost 1.5 per cent, Northern Star 3 per cent and Capricorn Metals 3.9 per cent.

And DroneShield jumped 7.1 per cent following heavy selling this week despite the heightened drone activity in the Middle East.

Stocks in focus

In corporate news, Pengana Capital added 3.5 per cent as it appointed Antipodes to assist with the management of its international equities listed investment company.

The Lottery Corporation fell 1.8 per cent amid plans to implement a new operating model in July that will create three customer-facing business units. It’s also reshaping its executive team.

Deep Yellow fell 0.8 per cent as its shares resumed trading after it quashed a media report that it was planning a capital raising.

And Star Entertainment fell 4.2 per cent. The Federal Court’s Justice Michael Lee has ruled that the Australian Securities and Investments Commission failed to prove its case against the majority of Star Entertainment’s directors. It, however, made an adverse finding against former CEO Matt Bekier.