The S&P/ASX200 rose 35.9 points on Thursday, up 0.41 per cent, to 8,732.4, as the broader All Ordinaries gained 36.4 points, or 0.41 per cent, to 8,910.9.
Long-dated yields eased from multi-decade highs after the US Federal Reserve delivered its first interest rate hike in three years, showing it was serious about taming inflation and tempering fears about bond markets, which act as plumbing for the global financial system.
Despite a strong, 90-point head-start on the back of the September futures contract expiry, the reality of higher-for-longer borrowing costs soon took the market tailwinds out of the top-200's sails, IG market analyst Tony Sycamore said.
"We've got that first rate hike out of the way, but the problem is what comes next, and potentially that's played a role in the lack of follow-through," Mr Sycamore told AAP.
"The bigger picture remains that rates are going higher here and abroad, and that just puts the ASX200 in a bit of a challenging light."
A NAB-led banking rebound supported the local exchange as seven of 11 local sectors traded lower, while energy stocks and non-energy miners slumped as oil, iron ore and gold prices eased from the session before.
Spot gold was trading at $US4,311 ($A6,066) an ounce, while local miners were a sea of red as the sub-index shrank by two per cent.
Copper prices bounced almost 1.4 per cent from their recent sell-off, but it wasn't enough to push BHP or Rio Tinto higher, which traded flat and lower respectively.
Health care stocks charged higher as Telix continued its run-up after a US regulatory win earlier in the week, while segment giant CSL resumed its rally as chair Brian McNamee issued a mea culpa on roughly two-years of underperformance.
In company news, Macquarie has been hit with a class action for approving the later-collapsed Shield Master Fund on its investment platform, despite already agreeing to pay $321 million in compensation to victims.
Class lawyers at Gordon Legal said the payout should cover both the capital losses and foregone returns.
Droneshield shares soared almost seven per cent higher after announcing the successful installation of its drone defence technology on US military Infantry Squad Vehicles (ISVs).
Bourse operator ASX Ltd jumped more than four per cent after investment giant UBS upgraded the beaten-down stock to a 'buy' rating.
The Australian dollar is buying 71.17 US cents, down from 71.31 US cents on Wednesday at 5pm.
ON THE ASX:
* The S&P/ASX200 gained 35.9 points, or 0.41 per cent, to 8,732.4
* The broader All Ordinaries rose 36.4 points, or 0.41 per cent, to 8,910.9
One Australian dollar trades for:
* 71.17 US cents, from 71.31 US cents at 5pm AEST on Wednesday
* 110.76 Japanese yen, from 110.52 Japanese yen
* 61.99 euro cents, from 61.75 euro cents
* 53.12 British pence, from 52.90 pence
* 123.98 NZ cents, from 123.88 NZ cents
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