The S&P/ASX200 was up 121.1 points, or 1.65 per cent, to 7,464.1 in early trading on Tuesday as the broader All Ordinaries lifted 137.1 points, or 1.80 per cent, to 7,659.8.
The rebound came after the two indexes each plummeted more than 4.1 per cent on Monday, erasing $109 billion from the top 500 stocks.
Wall Street closed mostly lower overnight with the S&P500 giving away 0.23 per cent after a wild but short-lived three per cent rally on news of potential tariff delays, which was later denied by US President Donald Trump.
Fear has rippled through equity markets around the world amid growing dread of a US recession and global economic downturn.
Investment giant Goldman Sachs has increased its expectations of a US recession to 45 per cent, and BlackRock boss Larry Fink has mused the world's largest economy is probably already contracting.
"If that is true, we are likely a month or two away from seeing a run of grim growth data accompanied by higher inflation readings," IG Markets analyst Tony Sycamore said.
Mr Trump has threatened to impose an extra 50 per cent tariff on goods from China unless it retracts its own 34 per cent retaliatory import tax on US goods.
The market response to the move has been mixed after Mr Trump indicated tariff talks with Japan and Israel had begun and invited trade partners to the table, increasing the likelihood the tariffs have room to move.
Ten of 11 local sectors were trading higher by midday AEST with IT stocks taking the lead, up more than four per cent, and consumer discretionary stocks up 2.8 per cent, while utilities stocks lost 0.2 per cent.Â
Monday's heavy losses in energy stocks and materials had narrowed by midday, up 3.2 per cent and 2.8 per cent respectively, as the oil price and iron ore miners rebounded.
Financials also bounced 0.8 per cent after tanking 4.8 per cent on Monday, with CBA up 1.4 per cent, Westpac up 0.2 per cent and ANZ and NAB eking out 0.3 per cent gains by lunchtime.
Oil prices have rebounded slightly but remain at three-year lows, as tariff-induced global growth concerns weigh on crude demand expectations, with Brent trading at $US64.70 a barrel.
Ongoing uncertainty in markets would likely cause volatility for some time, Moomoo market strategist Jessica Amir said.
"Investors that are not into riding rollercoasters should sit back until May or June, which is how long US Treasury Secretary Scott Bessent said tariff negotiations could take," Ms Amir said.
"While they are sitting on a big cash pile, investors need to see certainty before they'll 'buy the dip'."
Gold was down for a third straight session, shedding 2.4 per cent to $US2,963.19 per ounce.
The Australian dollar, which has plummeted more than five per cent since the "Liberation Day" tariffs were announced, is buying 60.17 US cents, up slightly from 60.14 US cents on Monday at 5pm.
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