By Chibuike Oguh and Elizabeth Howcroft

NEW YORK/PARIS (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, Alphabet and Amazon.

The S&P 500 index and Nasdaq notched 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 rose 1% to 43,819.27, the S&P 500 rose 0.52% to 6,173.07 and the Nasdaq Composite rose 0.52% to 20,273.46.

The pan-European STOXX 600 index finished up 1.1% and reached a weekly gain of 1.32%.

The MSCI World Equity index touched a record high of 916.39 and reached a weekly gain of 3.3%, making it the biggest weekly increase since mid-May. London's FTSE 100 rose 0.72%. Asian shares 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."