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SYDNEY, Aug 25 (Reuters) - Australian shares rebounded on Tuesday as investors picked up beaten-down bank stocks, a day after the market suffered its biggest drop in over six years.
The S&P/ASX 200 index .AXJO climbed 2.7 percent, or 136.0 points, to 5,137.3, recovering more than half of Monday's 4.1 percent drop.
Early in the session, the benchmark briefly dipped below 5,000 for the first time in two years.
All of the big four banks chalked up gains of between 3.6 percent and 4.9 percent. The major miners were also firmer with Rio Tinto (LONDON:RIO) RIO.AX rising 3.2 percent.
Shares bounced back despite further heavy selling in Chinese stocks and ongoing worries about slowing growth in the world's second-biggest economy.
New Zealand stocks also erased early losses to close slightly higher. The benchmark NZX 50 index edged up 0.1 percent, or 6.0 points, to 5,613.3.