(Updates to close)
SYDNEY, July 9 (Reuters) - Australian shares rose 1.5 percent on Tuesday, underpinned by a rally in banks, as a positive lead from European and U.S. markets buoyed investor sentiment following last week's volatility.
The S&P/ASX 200 index gained 72.2 points to 4,881.7, the highest close since June 4. It fell 0.7 percent on Monday.
The benchmark index extended gains despite the fact that China's annual consumer inflation quickened more than expected and Australia's business conditions weakened sharply in June.
The Australian market had been volatile for the past week on concerns about the U.S. Federal Reserve's plans to curtail its stimulus later this year, and on signs of slowing growth in China.
New Zealand's benchmark NZX 50 index rose 0.7 percent to 4,523.7. (Reporting by Maggie Lu Yueyang; Editing by Kim Coghill)