US equities extended their rally into mid-session on Friday, with strong gains across sectors as optimism over a US-China trade breakthrough fuelled risk appetite. The S&P 500 rose 0.6 percent to a new record high of 6,177.14, while the Nasdaq Composite advanced 0.5 percent. The Dow Jones Industrial Average surged 532 points, or 1.2 percent, in one of its best intraday performances in weeks.

Ten of the eleven sectors in the S&P 500 were trading higher, with industrials, consumer discretionary and real estate leading the advance. Energy was the sole laggard, weighed down by softer crude prices.

The rally picked up pace after US Commerce Secretary Howard Lutnick confirmed that a trade framework had been finalised with China and that similar agreements with 10 other countries were likely. China also acknowledged the deal, which includes provisions to resume rare earth exports to the US and scale back certain technology restrictions.

The sharp rebound marks a stunning reversal from the April lows, when the S&P 500 had fallen nearly 18 percent for the year amid tariff fears and geopolitical tensions. The benchmark index is now up over 20 percent from that trough and nearly 5 percent for the year, powered by steady inflows and a continued resurgence in AI-related stocks.

Chipmaker Nvidia rose 2 percent to hit another all-time high, while Microsoft also touched fresh peaks before paring gains. Apple, however, continued to lag the broader tech rally, inching up just 0.4 percent week-to-date and down around 19 percent for the year.

Inflation concerns, too, were shrugged off. The Fed’s preferred inflation gauge — the core PCE price index — rose 2.7 percent in May from a year earlier, slightly above the 2.6 percent estimate. Yet investors appeared confident that the uptick wouldn’t derail expectations for Federal Reserve rate cuts later this year.

In stocks making headlines, Core Scientific climbed 7 percent on fresh acquisition interest from AI cloud player CoreWeave. Tesla continued to gain for the week after launching its robotaxi service in Texas. On the other hand, Uber and Lyft fell around 3 percent each after Canaccord Genuity downgraded both stocks to ‘hold’, citing rising uncertainty from autonomous vehicle disruption.

Consumer sentiment also showed signs of recovery. The University of Michigan’s June survey showed a 16 percent month-on-month improvement, driven by easing inflation expectations and stronger household confidence.

European shares rally on global trade optimism

European markets also ended firmly higher, lifted by the same optimism over improving US-China trade relations. The Stoxx 600 index rose 1.1 percent, with Germany’s DAX up 1.5 percent, France’s CAC 40 gaining 1.8 percent, and the UK’s FTSE 100 advancing 0.7 percent.

Banking giants Barclays and Deutsche Bank surged to decade highs. Barclays shares touched their highest level since April 2010, buoyed by a strong first-quarter performance and attractive valuation. Deutsche Bank rose to levels last seen in 2015, with analysts pointing to improved capital allocation, geographic diversification, and a growing shareholder return focus.

Autos and financials led the charge in Europe, with investors relieved that geopolitical and macroeconomic worries have not derailed the broader recovery momentum.