Australian shares gained more than 1.5 per cent in a "relief rally" after the United States avoided a debt default with an eleventh-hour agreement to cut its deficit.
President Barack Obama said the deal will cut about $US1 trillion in spending over 10 years and avoid the nation's first ever default, which would have had a devastating effect on the US economy and global markets.
At 1615 AEST, the benchmark S&P/ASX200 index was up 73.2 points, or 1.65 per cent, at 4,497.8, while the broader All Ordinaries index was up 72.6 points, or 1.61 per cent, at 4,573.1.
On the ASX 24, the September share price index futures contract was 89 points higher at 4,466 points, with 41,624 contracts traded.
IG Markets dealer Chris Weston said the US deal had sparked some optimism on domestic markets and throughout Asia on Monday.
"We're certainly getting some relief there," he said.
"Asian markets are very buoyant today and the futures are predicting a pretty good relief rally in the US overnight."
But Mr Weston said there were still big questions for investors.
The US deal still needs to be approved by Congress and includes the establishment of a bipartisan committee of Congress to report back by November, with a proposal to further reduce the US deficit.
"The big question mark is do we get that downgrade to US debt?" Mr Weston said.
"While it's a good situation that we've avoided default, people are reluctant to take sizeable bets, so we're probably seeing a bit of short covering on the back of that."
Mr Weston said a positive vote in the US Senate could lead to a rally in the United States during the offshore session, despite ongoing concerns about US growth and the sustainability of the EU.
Tokyo shares jumped 1.84 per cent on the US debt news.
Locally, resources companies and banks were the main beneficiaries of the positive investor sentiment.
National Australia Bank was up 49 cents, or 2.04 per cent, at $24.49, ANZ added 46 cents, or 2.2 per cent, to $21.29, Commonwealth was up 82 cents, or 1.66 per cent, at $50.09 and Westpac had gained 39 cents, or 1.9 per cent, to $20.81.
Resources stocks were also higher, with BHP Billiton up 88 cents at $42.30 and Rio Tinto added $1.52 to $81.52.
Other big movers were Fortescue Metals, up 20 cents, or 3.3 per cent, to $6.51 and Lynas Corporation, up eight cents, or 3.72 per cent, at $2.23.
Macarthur Coal shares were up 28 cents, or 1.8 per cent, at $15.83 after it told shareholders to take no action after Peabody Energy and ArcelorMittal confirmed a $15.50 per share takeover offer.
In companies news, Telstra on Monday submitted the details of its structural separation, required as part of the rollout of the national broadband network, with the competition watchdog for approval.
Its shares were up three cents, or one per cent, at $3.02.
National turnover was 1.88 billion shares, worth $3.98 billion, with 765 shares up, 344 down, and 339 steady.
