GLOBAL MARKETS-Shares rally on China-US trade optimism, dollar trades at multi-year lows

By Chibuike Oguh and Elizabeth Howcroft

NEW YORK/PARIS, June 27 (Reuters) - Global shares reached a record high on Friday, helped by market optimism over signs of progress in U.S.-China trade talks, while the dollar held close to its lowest levels in more than three years.

The benchmark S&P 500 index and Nasdaq hit all-time highs, lifted partly by gains in megacap growth stocks including Nvidia NVDA.O and Amazon AMZN.O.

The S&P 500 index and Nasdaq are headed for a weekly gain and are up about 5% this year, following a volatile first half of the year, dominated by U.S. President Donald Trump's tariff announcement on April 2, which sent stocks plunging.

The Dow Jones Industrial Average .DJI rose 1.13% to 43,879.23, the S&P 500 .SPX rose 0.62% to 6,178.95 and the Nasdaq Composite .IXIC rose 0.51% to 20,270.99.

The pan-European STOXX 600 index finished up 1.1% .STOXX on the day, set for a weekly gain.

The MSCI World Equity index touched a record high and was set for a weekly gain of 3.3% .MIWD00000PUS. London's FTSE 100 rose 0.72% .FTSE. Asian shares .MIAPJ0000PUS hit their highest in more than three years in early trading but finished down 0.10%.

"It's a continuation of this monster rally since early April," said James St. Aubin, chief investment officer at Ocean Park Asset Management in Santa Monica, California.

"It's been quite an improbable comeback and it continues, assuming that the tariff controversy is no longer a major issue in the psyche of the market."

Investors saw a trade agreement between the United States and China on Thursday on how to expedite rare earth shipments to the United States as a positive sign, amid efforts to end the tariff war between the world's two biggest economies.

Trump has set July 9 as the deadline for the European Union and other countries to reach a deal to reduce tariffs.

"We're starting to see earnings estimates for the next 12 months on the rise again after taking a little bit of a dip and that's what the market is buying into," St. Aubin added.

Traders took confidence too from a ceasefire between Iran and Israel and markets stepped up bets for U.S. rate cuts amid the possibility of Trump announcing a new, more dovish Federal Reserve chair ahead of the expiration of Jerome Powell's term next year.

Data showed U.S. consumer spending unexpectedly fell by 0.1% in May for the second time this year, while monthly inflation maintained a moderate pace of increase.

"What we're really witnessing this week is sort of the removal of some of the stumbling blocks that have been placed in the middle of the road," said Mark Malek, chief investment officer at SiebertNXT. "We've had all these trade issues that are still up in the air and we had this the big overhang of what was going on in the Middle East."

DOLLAR DIPS

The dollar traded at multi-year lows, hovering near its lowest level in 3-1/2 years against the euro and sterling.

The dollar weakened 0.01% to 0.799 against the Swiss franc CHF=EBS but was up 0.24% to 144.725 against the Japanese yen JPY=EBS. The euro was at $1.17110 EUR=EBS, getting a lift after data showed French consumer prices rose more than expected in June.

The dollar index was down 0.05% on the day at 97.322 =USD, holding near its lowest in more than three years. The dollar is having its worst start to a year since the era of free-floating currencies began in the early 1970s.

The yield on benchmark U.S. 10-year notes US10YT=RR fell 0.2 basis points to 4.246%.

German 30-year government bond yields DE30YT=RR were on track for their biggest weekly increase in nearly four months after rising this week on expectations of increased borrowing by Germany's government.

Oil prices meanwhile rose but were set for their steepest weekly decline since March 2023, as the absence of significant supply disruption from the Iran-Israel conflict saw any risk premium evaporate.

Brent crude futures LCOc1 rose 0.13% to $67.82 a barrel while U.S. West Texas Intermediate crude was up by 0.25% to $65.4 CLc1. Spot gold XAU= fell 1.64% to $3,273.28 an ounce.