The Australian share market has closed higher, with mining stocks jumping after a sharp rally in iron ore prices.

European and US markets had provided positive leads on better news about Greece’s pursuit of a debt deal and a halt to Chinese stock market falls.

The Australian market was down more than 0.8 per cent for the week following heavy falls on Monday and Wednesday due to investors worries about China’s massive share falls.

CMC Markets chief market analyst Ric Spooner said the fact that Greece had proposed a debt solution to creditors ahead of weekend talks, a settling in China’s shares and a jump in iron ore prices had calmed investors.

“The market still finished off today’s highs as people battened down the hatches ahead of what may be yet again another weekend of significant news out of Europe,” he told AAP.

Mining stocks were the best performing sector, closing nearly two per cent higher after a rise of almost 10 per cent in iron ore prices.

BHP Billiton closed up 77 cents, or three per cent, at 26.65, Rio Tinto gained $1.18, or 2.3 per cent, to $52.07 and Fortescue Metals Group found three cents to rise to $1.815.

The big four banks had a mixed day.

ANZ gained four cents to $32.25, Commonwealth Bank rose 19 cents to $85.79, National Australia Bank fell six cents to $33.07 and Westpac was 22 cents higher at $33.10.

Medibank Private shares were flat at $2.09 after Australia’s largest private health insurer said it would no longer pay for hospital treatment resulting from medical mistakes.

KEY FACTS

* At the close on Friday, the benchmark S&P/ASX200 index was up 21 points, or 0.38 per cent, at 5,492 points.

* The broader All Ordinaries index was up 21.8 points, or 0.4 per cent, at 5,478.1 points.

* The September share price index futures contract was 29 points higher at 5,437 points, with 24,296 contracts traded.

* National turnover was 1.3 billion securities worth $3.5 billion.