Bargain hunting among the oversold big banks and gains in the miners offset falls in telcos and energy stocks on Tuesday, sparking a 40-point afternoon rally in the ASX.

Bank holidays in key US, UK and Chinese markets saw the bourse plumb three-month lows in early trade, but a change of heart spread through the market in the afternoon and pulled the ASX comfortably into the black.

The benchmark S&P/ASX 200 Index lifted 0.2 per cent to 5717.9 points and the broader All Ordinaries Index closed up 0.1 per cent to 5756 points.

"May and June are seasonally the weakest months, especially for the banks," says James Gerrish, senior investment adviser at Shaw & Partners.

"Looks like the bulk of that selling has come off. It's one of those well known facts, so well known that it becomes a self-fulfilling prophecy."

There has been a widespread distaste for banking stocks in recent weeks as investors contemplate just how much of an impact the federal government's tax on bank liabilities will have on the bottom lines.

However, Tuesday's announcement that the first payment date of the $6.2 billion tax will be delayed seemed to at least temporarily coincide with investors' belief banks had sunk low enough.

Commonwealth Bank of Australia closed the day up 0.7 per cent, Westpac Banking Corporation was up 1 per cent. ANZ Banking Group finished the day 0.8 per cent higher and National Australia Bank closed up 1.6 per cent.

The resource giants responded positively to a lift in the iron ore price, which was fetching $US58.50 a tonne. Rio Tinto and Fortescue Metals enjoyed some buying support, closing up 1 per cent and 1.9 per cent respectively.

A rising oil price also buoyed BHP Billiton which closed up 0.7 per cent.

The price of Brent crude lifted to $US52.19 a barrel on expectations OPEC will succeed in bringing down inventories as the summer driving season kicks off in the United States.

In other equities news, Domino's Pizza remained under heavy selling pressure, falling another 1.4 per cent to $58.38 after Morgan's and Deutsche Bank downgraded the stock on Monday.

Stock Watch: NIB Holdings

Shares in private health fund NIB Holdings tumbled 4.6 per cent to $5.14 on Tuesday after it emerged the ACCC has initiated proceedings against it in the Federal Court. The regulator alleges a failure in August 2015 to communicate to customers changes made to its Medigap scheme. NIB has rejected the position, saying it has acted lawfully and ethically. Its shares have had a tough month, falling steeply last week after Credit Suisse downgraded the company, believing the shares don't deserve to trade at their previous premium. The bank has a target of $5.50 per share. Analysts are mostly downbeat on the stock, with just two rating it a 'buy', while six see it as a 'hold' and five a 'sell', according to Bloomberg. The average price target is $2.54.

Market movers

Building approvals

Approvals for the construction of new homes rose 4.4 per cent in April, beating market expectations of a 3.0 per cent rise. But over the 12 months to April, building approvals were down 17.2 per cent, as the biggest-ever home-building boom cools. Approvals for private sector houses rose 0.5 per cent in the month, and the 'other dwellings' category, which includes apartment blocks and townhouses, was up 9.6 per cent. Building approvals have been on a decline since last August, with the once-booming apartment sector the biggest hit.

Early sales

Retailers David Jones and Myer are slashing prices on autumn/winter apparel by as much as 50 per cent after pulling the trigger on mid-year clearance sales following the weakest retail trading in five years. The clearance sales follow the worst retail trading conditions since 2012 as cash-strapped consumers cut back on discretionary spending in the face of soaring living costs, stagnant wages growth, record household debt, stalling house prices and looming job losses.

Australian dollar

The local currency moved listlessly on Tuesday, initially falling in the morning as global investors contemplated soft commodity markets rather than any specific news, but then rose 0.3 per cent higher in the afternoon to US74.40¢ following April's positive building approvals. Currency traders are mostly focused on whether the US Federal Reserve will raise rates in June; markets are largely pricing in a hike. The Aussie remains under the gun more so from a general view that downside risk to the commodity space abounds, traders said.

Italian election

Italian banks and European blue chips have come under pressure as worries over recapitalisations of regional Italian lenders bled over into a second week. Weekend reports that Italy's main parties could converge on a proportional electoral law pointed to growing chances of an early election that may yield an indecisive hung parliament. "The risk of early elections has suddenly increased to 60 per cent," LC Macro Advisers founder Lorenzo Codogno said. "A hung parliament is thus the most likely outcome."