The benchmark S&P/ASX 200 ended down 0.5 points, or 0.01 percent, at 4,140.8, having been nearly two percent off in early trade.
"Today's session has been pretty spectacular, highlighted by 'off-the-charts' volatility," said IG Markets analyst Ben Potter.
"It looks like there have been some big buy orders in the market, which have been flicked on and off by computers."
The markets opened sharply lower but started clawing back losses after unemployment data showed the jobless rate unexpectedly rose 0.1 percentage point in July to 5.1 percent,
Coupled with weak consumer confidence and retail sales, analysts said the figures increased pressure on the Reserve Bank of Australia to cut its official interest rate.
"The sharply weaker employment data released could have been one of the catalysts (for the rally), as analysts started throwing in the towel on remaining rate hike expectations and instigating fresh cut forecasts," said Potter.
The Australian dollar see-sawed with the market and was trading at 102.66 US cents late in the day, after closing at 103.63 cent on Wednesday.
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