Australia shares bounce 1.7 pct after selloff, Greece still a worry

* Shares (Berlin: DI6.BE - news) up 1.7 percent

* Broad-based gains led by banks

* Greece remains a worry

* 176 shares up, 17 down and 6 unchanged (Adds analysis, quotes, stocks on the move)

By Pauline Askin and Naomi Tajitsu

SYDNEY/WELLINGTON, July 7 (Reuters) - Australian shares rebounded 1.7 percent on Tuesday on broad-based gains following two-losing sessions, as investors sought to buy stocks cheapened by the debt crisis in Greece.

The S&P/ASX 200 index rose 99.9 points to 5,574 by 0211 GMT, it's biggest daily percentage gain in 3-1/2 months. The benchmark fell 1.1 percent for its second day of losses on Monday.

"Volatility is without doubt the major theme in equity markets at the moment," James McGlew, Executive Director of Corporate Stockbroking, Argonaut said.

"Inspite of very weak commodity prices ... the whole game today has been the pursuit of yields and safety, in particular the banks," he added.

The index has fallen every month since March, largely dragged lower by banks and resources shares. The Greek debt sage and a slowdown in China, Australia's No 1 trading partner, has weighed on the market.

Global markets have been volatile in recent weeks as Greece's standoff with its creditors raised the risk of the debt-laden nation making a disorderly exit from the currency union.

Banks, which are coveted by investors for their attractive dividends, led the gains. National Australia Bank rose 2.3 percent, Westpac Bank gained 2.9 percent and Australia and New Zealand Banking Group jumped 2.1 percent.

A sharp drop in oil prices overnight hit energy stocks, with Origin Energy and Santos down 1 percent and 1.5 percent respectively.

Telecom stocks rallied with Telstra up 2.3 percent and TPG Telecom up 3 percent.

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New Zealand's benchmark NZX 50 index added 0.4 percent or 25.5 points to 5,802,1, supported by the healthcare sector.

Summerset jumped 3.7 percent to NZ$3.67, approaching a lifetime high of NZ$3.75 after the retirement village operator issued upbeat full year earnings guidance.

Optimism about the country's growing elderly care sector lifted other healthcare shares, with retirement village operator Ryman Healthcare rising 1.27 percent.

Fletcher Building (NZSE: FBU.NZ - news) rose 0.9 percent to NZ$7.97, after a slide to a three-year low of NZ$7.90 on Monday prompted dip buying in shares of one of the country's largest companies by market capitalisation.

(Editing by Shri Navaratnam)