Elliot Management, which holds about 4.1 per cent of BHP's London-listed shares, proposed unifying BHP's dual-listed company structure into a sole Australian entity and separately listing the miner's US petroleum business on the New York stock exchange.

BHP shares, which were already trading higher thanks to a rise in the oil price, surged in late trade to close 4.6 per cent higher at $25.73.

"That letter to the board has done the rounds and saw BHP jump sharply higher," said James Gerrish, senior investment advisor at Shaw & Partners.

"That's lifted the market higher still. Further, the ASX has had the kitchen sink thrown at it recently and it's shown to be fairly resilient. Strong bidding in the banks has also helped the market perform well on Monday."

The benchmark S&P/ASX 200 Index climbed 0.7 per cent to 5912.9 points, its highest since late April 2015.

Mining stocks led the bourse higher, despite a plunge in the iron ore price on Friday, followed closely by energy and utilities stocks, while healthcare and technology companies finished in the red. There was also broadbased buying in the big four banks, thanks to a lift in bond yields.

The big four banks traded between 0.6 per cent and 1 per cent higher. National Australia Bank also announced it will raise fixed-rate mortgage rates again, its fifth change in rates, policies and marketing in a month.

While the diversified mining giants shrugged off Friday's 6.8 per cent slump in the iron ore price, smaller producers faced a sharp backlash. Atlas Iron was one of the worst performers on the ASX, closing down 11.1 per cent, while Sundance Energy was off 4.2 per cent.

In other equities news, Telstra shares traded 0.4 per cent higher. Rumours continue to circulate the telco giant might take back control of some of its retail stores, currently managed by Vita Group. As a result, the Vita share price crumbled 3.3 per cent despite the company denying the reports.

WorleyParsons shares soared 4.1 per cent to a two-year high, after an investor, said to be Dar Group, snapped up a $175 million stake. The shares changed hands at a 4 per cent premium to where they finished last week, and represented about 6 per cent of the company's issued equity, according to Street Talk.

Investors continued to punish The Reject Shop following Friday's disappointing market update. The discount retailer is embroiled in difficult trading conditions which have seen a 4 per cent decline in same-store-sales for the half year to date. The share price fell another 18.6 per cent on Monday, taking the damage to an almost 70 per cent slide over the last twelve months.

Short-sellers are making things difficult for lithium producer Orocobre, sending the price down 3.4 per cent on Monday, despite there being no news out. The Brisbane-based company is the most shorted stock on the ASX and investors are wary of the firm following the cut in its FY17 production guidance.

Telecommunications provider Amaysim enjoyed a 5.4 per cent boost in its share price following its $120 million acquisition of online energy retailer Click Energy. The deal, to be funded $80 million by cash and the rest by scrip, represents an 11-fold increase in the value of Click since it was acquired for $11 million four years ago, Click said.

Stock Watch: Auscann Group

Shares in medical marijuana producer Auscann Group leapt 3.9 per cent after the company announced its first cannabis crop in Chile has begun harvesting. Approximately 300 kilograms of dried cannabis product from the harvest will be sent to a GMP certified manufacturing facility to be processed into medicinal cannabis formulations. The company also announced four of the harvested strains have been selected as superior strains which have been clonally selected for future crops. If the clinical trials in Chile are successful, these formulations will be registered through the Chilean National Institute of Public Health and then made available for sale to Chilean patients and export markets. Investors have piled into the "pot stock" sending it up 265 per cent this year alone.

Market Movers

US Fed indication

The US Federal Reserve's James Bullard, president of the US central bank's St Louis branch, spoke in Melbourne on Monday and he had a fairly dovish message for investors. Bullard believes one more rate hike would be sufficient this year, but he also said now is a good time to start reducing the Fed's super-sized $US4.5 trillion balance sheet, which is a form of monetary tightening. "The US economy has arguably converged to a low-real-GDP-growth, low-safe-real-interest-rate regime," he said, adding that this situation is unlikely to change dramatically in 2017.

Home Loans

The number of home loan approvals fell 0.5 per cent in February, brought down by a surprise slide in investor loans. Economists had expected a flat reading. The value of total housing finance fell 2.7 per cent to $32.92 billion in the month, while the value of loans approved for owner-occupied housing slipped 0.5 per cent in February and loans for investment housing slumped 5.9 per cent. Refinancing activity was also major drag and fell close to 5 per cent, meaning genuine new loan growth was a little firmer than the headline print would otherwise suggest, JPMorgan economist Tom Kennedy said.

Risk-off commodities

Zinc slid for a third day, leading the rest of industrial metals lower, as investors continued to shun geopolitical risk following the United States air strike on Syria. The absence of major fundamental support for commodities such as zinc and copper, means investors have turned to geopolitical factors as drivers, said Helen Lau, analyst at Argonaut Securities in Hong Kong. "It's still a little bit risk-off today with the tensions between Russia and the US," she said. Last week, US President Donald Trump ordered missile strikes against a Syrian airfield from which a deadly chemical weapons attack was launched.

Australian dollar

The Australian dollar dropped to a three-month low against the greenback on Monday, as risk-averse investors seek safer assets and the greenback rallied following a US central banker's comments on further interest rate hikes. A drop in iron ore and coking coal prices - Australia's top export earners - as well as softer than expected housing finance numbers are also weighing on the local dollar. The Aussie slipped for a third straight day to US74.78??, a level last seen in mid-January. The Aussie has fallen in seven out of the last ten sessions.