After dipping 30 points in the first 90 minutes of trade, the benchmark S&P/ASX200 index spent Monday afternoon clawing back its losses to finish up five points, or 0.07 per cent, to a two-month high of 7020.6.
The broader All Ordinaries gained 9.2 points, or 0.13 per cent, to 7259.5.
"We started on a slightly weaker note, but we've seen buyers come through, which is good," said Pepperstone head of research Chris Weston.
"The price action of the market is quite compelling at the moment, the momentum is really on the upside. The bulls are in control right now, and we're asking ourselves what derails this situation."
Mr Weston told AAP there was "real zest" in the market and he could see the ASX200 heading to its 200-day moving average at 7172, although traders will be watching what happens with the release of US inflation data on Wednesday night.
The ASX's 11 official sectors were mixed on Monday, with energy and mining both up around 1.8 per cent, with utilities close behind and financials flat. But property was down two per cent and consumer discretionary shares dropped 1.9 per cent.
OZ Minerals was the big gainer on the day, soaring 35.3 per cent to a three-month high of $25.59 after BHP made a $8.4 billion offer for the ASX100 copper miner.
OZ's board rejected the initial $25-per-share bid, but with compelling synergies between the two companies' SA and WA-based mining assets, traders appeared to be betting that a sweeter offer would materialise.
Other copper miners also gained, with Sandfire Resources rising 6.4 per cent, Aeris Resources climbing 11.7 per cent, Hot Chili adding 14.7 per cent and Copper Mountain soaring 38.6 per cent.
BHP meanwhile gained 0.8 per cent to $39.12, while Rio Tinto gained 1.9 per cent to $99.57 and Fortescue Metals added 4.5 per cent to $18.96.
In the energy sector, Woodside gained 2.1 per cent to $31.75 as oil prices rose as recessionary fears seemed to fade. Brent crude was trading for US$96 a barrel, up from $94 late last week.
Elsewhere, Aurizon Holdings fell 3.5 per cent to $3.90 after the rail freight operator announced its full-year earnings had dropped one per cent to $1.47 billion.
Weather and COVID-19 disruptions had offset an escalation of revenue from Aurizon's contracts with coalminers, which are linked to inflation.
Suncorp was down 4.6 per cent to $11.11 after the insurer said its full-year net profit after tax fell 36.7 per cent to $681 million, modestly missing expectations.
Suncorp said the La Nina weather pattern had contributed to 35 major natural hazard events and about 130,000 claims in Australia and New Zealand, blowing out its natural hazard allowance by $101 million.
Commonwealth Bank was up 1.2 per cent to $102.60 after the banking behemoth said it would recognise a $516 million profit on the sale of its 10 per cent stake in Bank of Hangzhou when it announces its earnings on Wednesday.
Westpac was up 0.5 per cent to $22.07, while NAB fell 0.7 per cent to $30.71 and ANZ dropped 0.2 per cent to $22.91.
Meanwhile, the Australian dollar was buying 69.36 US cents, down from 69.66 US cents on Friday.
ON THE ASX:
* The benchmark S&P/ASX200 index on Monday closed up five point, or 0.07 per cent, at 7020.6.
* The All Ordinaries gained 9.2 points, or 0.13 per cent, to 7259.5.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 69.36 US cents, from 69.66 US cents at Friday's close
* 94.06 Japanese yen, from 92.92 yen
* 68.22 Euro cents, from 68.10 cents
* 57.48 British pence, from 57.33 pence
* 111.14 NZ cents, from 110.59 cents