PARIS - European stock indexes opened higher on Friday, helped by signs of progress in US-China trade talks, while the dollar slipped to its lowest in more than three years.

Global stock markets have rallied to record highs this week, as traders took confidence from a ceasefire between Iran and Israel and markets stepped up bets for US rate cuts.

A trade agreement between the US and China on Thursday on how to expedite rare earth shipments to the US was also seen by markets as a positive sign, amid efforts to end the tariff war between the world's two biggest economies.

European shares rose in early trading, after Asian shares hit their highest in more than three years in early trading, tracking the Wall Street rally.

At 0852 GMT, the pan-European STOXX 600 was up 0.9 percent on the day, set for a 1.1 percent weekly gain. London's FTSE 100 was up 0.5 percent and Germany's DAX was up 0.8 percent.

The MSCI World Equity Index was up 0.2 percent on the day at set for a weekly gain of 2.9 percent.

The S&P 500 index is up just 4.4 percent this year overall, following a volatile first half of the year, dominated by US President Donald Trump's "Liberation Day" tariff announcement on April 2, which sent stocks plunging.

“What we are having right now is potentially some optimism about some trade deals," said Vasileios Gkionakis, senior economist and strategist and Aviva Investors.

"We have quite come from quite low levels in the aftermath of the Liberation Day in April. To a certain extent we have also had some mini-selloff on the back of the events in the Middle East, and in that sense we’re rebounding."

“I think it’s very early days, but I think there is a sense in the market that we are getting a bit fatigued with the theme of trade, and trade wars and trade deals, and would like to move past that," he added.

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

Dollar drop

The US dollar's decline continued, with the dollar index down 0.2 percent on the day at 97.183, its lowest in more than three years. The euro was at $1.1713, getting a lift after data showed French consumer prices rose more than expected in June.

Markets are focused on US monetary policy, as traders weigh up the possibility of Trump announcing a new, more dovish, chair of the Federal Reserve.

Traders have stepped up their bets on US rate cuts, and are now pricing in 64 basis points (bps) of easing this year versus 46 bps expected on Friday.

The dollar is having its worst start to a year since the era of free-floating currencies began in the early 1970s.

“I don’t think it’s just the repricing of the Fed, I think there is a broader issue here of some tarnishing of US. exceptionalism,” Aviva Investors' Gkionakis said.

Core PCE price data, the US central bank's preferred measure of inflation, is due later in the session.

European bond yields were mostly steady, with the benchmark 10-year German bond little changed at 2.567 percent.

In commodities, oil prices were set for their biggest weekly decline since March 2023, as prices cooled back down after spiking briefly above $80 on news of the Israel-Iran conflict. Brent crude futures were trading at $68.35 a barrel, and US West Texas Intermediate crude was at $65.24 a barrel.