Australian shares rose 0.8 per cent, buoyed by hopes that European leaders may be able to thrash out a deal to salvage the region’s debt crisis this week.

Markets spent the day in positive territory after Italy’s new government announced a raft of stringent austerity measures worth 20 billion euros ($A26.44 billion).

Chris Weston from IG Markets said the deal has boosted hopes that debt-laden Greece may come up with similar measures tomorrow night ahead of a key Eurozone meeting on Friday.

“The Italians are coming out guns blazing,” he said.

“Hopefully that should keep momentum in the bond market going in the right direction.”

At the close on Monday, the benchmark S&P/ASX200 index was up 33.3 points, or 0.8 per cent, at 4,321.3, while the broader All Ordinaries index gained 33.2 points, or 0.8 per cent, to 4,379.5.

On the ASX 24, the December share price index futures contract was 28 points higher at 4,326, with 33,547 contracts traded.

AAP cah/dlm