Australian shares added 1.1 per cent after positive Chinese trade data boosted markets already buoyed by positive US earnings and hopes for a pick-up in local buyout deals.

Exports from Australia's largest trading partner rose 13.4 per cent in December compared to a year earlier as Japanese and emerging markets boosted demand for Chinese goods, government data showed.

The figures built on a promising start to the US earnings season with Alcoa reporting earnings overnight and spurred hopes that the global economy may start to emerge from the global economic downturn this year.

"Together with December's rebounding (manufacturing data) we think that the economy has started to stabilise, and is likely to find a soft landing in the first quarter of 2012," ANZ Bank said.

At the close on Tuesday, the benchmark S&P/ASX200 index was up 46.8 points, or 1.1 per cent, at 4,152.2, while the broader All Ordinaries index was up 45.1 points, also 1.1 per cent, at 4,206.6.

On the ASX 24, the March 2012 share price index futures contract was 50 points higher at 4,122, with 24,805 contracts traded.

Markets also took heart from news of a further pick up in private equity deals.

Shares in Pacific Brands surged 14.3 to 64 cents after the clothing manufacturer confirmed it had received an unsolicited takeover approach from US-based private equity firm KKR.

The offer "has added a bit of spark to an otherwise lacklustre market," director of EL&C Baillieu Stockbroking Richard Morrow said.

It comes a day after Spotless Group told its private equity suitor Pacific Equity Partners that a $743.4 million offer would be needed to obtain a unanimous recommendation from the board.

Shares in the contract cleaner ended down 0.8 per cent at $2.35 after PEP hinted that it would not raise its offer, describing the $711 million price tag as "highly attractive." PEP on Tuesday said it could not progress its proposal without access to due diligence.

Nonetheless the rise in activity "has got a few share market tragics excited that if their shares get cheap enough then private equity will come along and make them an offer," Mr Morrow said.

Materials and energy stocks were some of the biggest winners of the day, with both sectors adding 1.7 per cent as investors gained appetite for riskier investments.

Local aluminium maker Alumina gained 6.85 per cent to $1.17, helped by the positive leads from its joint-venture partner, Alcoa, opened the US reporting season by delivering results ahead of market consensus.

CMC Markets' chief market analyst Ric Spooner said investors would be watching the US earnings season over the next month before the Australian reporting season begins in February.

"If these signs of improved demand translate into better than expected revenue growth for companies, it will become difficult for investors to ignore equities at current earnings multiples," he said.

Property trusts also got a boost from government data showing that Australian residential building approvals rose 8.4 per cent to 11,424 units in November, above analysts' forecasts of six per cent.