Shares climbed to their highest point since June 2008, spurred by a foreign bid for David Jones, stronger commodity prices, an unexpected rise in consumer confidence and an acceleration in home lending.

A broad rally across the big four banks, Telstra and the big miners was turbo-charged by news that the department store chain agreed to a takeover offer by South African retailer Woolworths and WorleyParsons launched a restructure.

The benchmark S&P/ASX 200 Index rose 53.2 points, or 1 per cent, on Wednesday to 5463.8, while the broader All Ordinaries Index also added 1 per cent to 5460.3.

Local shares opened higher after equity markets in the United States rebounded on Tuesday night as concerns about the technology sector abated. Asian markets provided mixed cues in the afternoon session, with Hong Kong's Hang Seng trading higher while Japan's Nikkei fell for the fourth day in a row after the yen appreciated sharply against the US dollar.

With local shares at a more than five-year high investors are questioning whether the gains can continue. Equity strategists at Credit Suisse are bullish, tipping the ASX 200 will end the year at 5800. But some fund managers are cautious and taking risk off the table.

"After such a strong rise over the past year, without a significant improvement in underlying company earnings, the market is probably close to topped out for now. We are holding a high proportion of the portfolio in cash," NAOS Asset Management associate portfolio manager Tom Granger said.

"The market probably won't fall far while interest rates are steady but shares could see a correction when the cash rate does eventually rise."

Ardea Investment Management portfolio manager Tamar Hamlyn expects it will be at least six months before the Reserve Bank of Australia raises rates. "And while a rate rise will impact confidence overnight there will be a six to 12 month lag period before the economy shows the effects," Mr Hamlyn said.

The monthly Westpac Melbourne Institute Index of consumer confidence beat expectations it would fall with a rise of 0.3 per cent in April to 99.7 points. A report from the Australian Bureau of Statistics showed housing finance commitments were flat in trend terms for February, but rose 2.3 per cent in seasonally adjusted terms.

The big four lenders were all higher. Commonwealth Bank of Australia rose 1 per cent to $77.49, while Westpac Banking Corporation added 0.7 per cent to $34.70. ANZ Banking Group lifted 0.9 per cent to $33.86, and National Australia Bank gained 0.6 per cent to $35.40.

Retail was the best-performing sector led by David Jones. The upmarket department store chain surged 22.6 per cent to $3.91, its highest price since the crash of November 2007, as the board recommended shareholders accept a $2.148 billion takeover offer from South African retail giant Woolworths (no connection to ASX-listed retailer of the same name). Main rival, and trumped suitor, Myer Holdings rose 3.9 per cent to $2.39.

"Woolworths' offer was a knock-out punch for Myer," Morningstar analyst Tim Montague Jonessaid. "It represents a price to earnings multiple of 20 times next year's forecast earnings, high by any standard but especially for a company that has struggled to grow earnings for a number of years."

Solomon Lew's retail group Premier Investments was unchanged at $9.85 ahead of trading without the rights to a 20¢ per share interim dividend on Thursday.

Gains in the resources sector were strong as commodity prices for gold, copper, and oil all lifted while the spot price for iron ore, landed in China, rose 0.9 per cent to $US118.20 a tonne.

Resources giant BHP Billiton gained 1.4 per cent to $38.40, while main rival Rio Tinto added 1 per cent to $65.14. Rio Tinto subsidiary Energy Resources Australia rose 0.4 per cent to $1.38 after flagging uranium processing could re-start at its Ranger project within three weeks.

Australia's biggest oil producer Woodside Petroleum gained 1.1 per cent to $39.31, while the biggest gold producer, Newcrest Mining, added 3.7 per cent to $10.89.

Engineering services group WorleyParsons jumped 6.9 per cent to $16.55 as it announced plans to spend $35 million on restructuring the business into three separate entities.

Among major defensive bluechip stocks Telstra Corporation rose 0.8 per cent at $5.08, while AGL Energy added 2.4 per cent to $15.65. The biggest food and liquor retailers were higher as Woolworths gained 0.6 per cent to $35.93, while Wesfarmers, owner of Coles, rose 1.2 per cent to $42.67.

Manufacturers and industrial exporters lagged as the Australian dollar hit a four-month high of US93.88¢. Medical device manufacturer ResMed dropped 1.6 cent to $4.84, while building materials supplier James Hardie was the worst-performing stock in the benchmark index down 2.7 per cent to $13.60.

Brickworks, also a building materials supplier, fell 0.3 per cent to $13.80 after trading without the rights to a 14¢ per share interim dividend.