* Euro rallies in volatile session, supports Brent
* French banks agree to roll over Greek debt holdings
* U.S. bank shares up after global capital rules announced (Updates prices to U.S. market close, adds Nikkei futures)
By Rodrigo Campos
NEW YORK, June 27 (Reuters) - U.S. stocks snapped a three-day losing streak and the euro rallied against the dollar on Monday on increasing confidence the Greek parliament will pass an unpopular austerity plan, and as French banks outlined an agreement to roll over Greek debt.
Treasury prices fell as the developments in Europe lured investors into riskier assets, while low yields in the U.S. government's sale of two-year notes discouraged some potential buyers.
U.S. stocks rose around 1 percent, leading global shares higher, with banks among the top gainers after regulators announced global capital rules that were not as harsh as previously feared. For details see [ID:nN1E75Q0N3].
"We don't see this being the start of a major rally but this is welcome strength in the market and hopefully a welcome short-term bottom," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.
Greek lawmakers were to begin debating on Monday evening a 28 billion euro ($40 billion) package of measures to increase taxes and cut fiscal spending that is critical to winning a new round of international funding to keep the country afloat. [ID:nLDE75P0BM].
"As long as the Greek Parliament votes 'yes' this week on an austerity plan, stocks are going to go up," said Cary Leahey, economist and managing director at Decision Economics in New York.
Greek Prime Minister George Papandreou on Monday called on all political parties to back an unpopular five-year austerity plan, which international lenders have made a condition for further aid to Greece.
French banks, among the most exposed to the Greek debt crisis, have reached an outline agreement to roll over holdings of maturing Greek bonds. French President Nicolas Sarkozy confirmed the breakthrough on Monday and German bankers voiced their interest in the "French model." [ID:nL6E7HR0GU]
The Dow Jones industrial average <.DJI> gained 108.98 points, or 0.91 percent, to 12,043.56. The S&P 500 <.SPX> added 11.65 points, or 0.92 percent, to 1,280.10. The Nasdaq Composite <.IXIC> jumped 35.39 points, or 1.33 percent, to 2,688.28.
The S&P financial index <.GSPF> ended up 1.1 percent and an index of large U.S. bank stocks <.BKX> rose 1.4 percent.
Ghriskey, of Solaris, said financials were "a very oversold group" that was due for a bounce.
On Saturday, global banking regulators in Basel agreed that the biggest banks globally will need to boost their ratios of common equity to risk-weighted assets by up to 2.5 percentage points, less than the 3 percentage points some investors had feared. [ID:nLDE75O053]
Global stocks as measured by MSCI <.MIWD00000PUS> were up
0.4 percent for the day. U.S. dollar-denominated Nikkei futures
The pan-European FTSEurofirst 300 <.FTEU3> index of top shares provisionally closed up 0.1 percent at 1,074.82.
Treasuries fell as shrinking worries over a Greek default reduced safe-haven demand for U.S. government debt. A sale of two-year notes with a yield of less than half a percent further discouraged buyers.
Benchmark 10-year U.S. Treasury notes
"It was a relatively weak auction, almost certainly because two-year rates are within shouting distance of the all-time rate lows set in November 2010," RBS head of Treasury strategy William O'Donnell said in a note to clients.
EURO UP, OIL WEAK
The euro rallied against the U.S. dollar as investors became optimistic the austerity vote will pass in the Greek parliament and the euro zone member can avoid a default on its debt.
The euro had been swinging between gains and losses throughout the global session, responding to each headline or market rumor on the Greek vote, traders said.
"I think the vote will pass or we would be seeing a huge sell-off," said Kathy Lien, director of currency research at GFT Forex in New York. "The fate of the euro/dollar hinges on the outcome of the vote."
The single currency
U.S. crude oil futures
Brent crude futures settled 87 cents higher at $105.99 a barrel and U.S. light crude futures settled down 55 cents to $90.61 a barrel.
Gold prices fell for a third session as investors bet that
Greece would avoid default. U.S. gold futures for August
delivery