* Nasdaq, S&P 500 at record highs with tech names in the lead
* Markets hope for U.S.-Canada trade deal
* Turkey's lira hits a two-week low; oil spikes on Iran news (New throughout, updates prices, market activity and comment to reflect afternoon U.S. trading)
By Trevor Hunnicutt
NEW YORK, Aug 29 (Reuters) - A major global stock index jumped to 5-1/2-month highs on Wednesday as optimism on the potential for U.S. trade deals cleared the path for technology stocks to resume their leadership mantle.
Talks to renew the North American Free Trade Agreement (NAFTA) hinge on Canada after Monday's deal between the other parties to that pact, the United States and Mexico.
MSCI's world equity index, which tracks shares in 47 countries, gained 0.39 percent as the S&P 500 and the Nasdaq U.S. stock indexes hit all-time highs.
The Dow Jones Industrial Average rose 87.04 points, or 0.33 percent, to 26,151.06, the S&P 500 gained 16.96 points, or 0.59 percent, to 2,914.48 and the Nasdaq Composite added 69.34 points, or 0.86 percent, to 8,099.38.
Aberdeen Standard Investments head of global strategy Andrew Milligan said investor optimism was tinged with caution. He noted there it was hard to predict U.S. trade negotiations which could make markets choppy.
"It is an erratic rally," he said. "We need a bit more fuel to the fire."
U.S. President Donald Trump threatened to proceed with Mexico alone and levy tariffs on Canada if it did not come on board with revised trade terms. But a trade deal without Canada might not win approval from the U.S. Congress.
"The final decisions are unlikely until 2019 at the earliest," Goldman Sachs analysts wrote in a note to clients.
Still, familiar leaders from this long bull market run resumed their leadership role, with Amazon.com Inc, Apple Inc and Microsoft Corp among those lifting Wall Street indexes higher.
The dollar, which has been a safe haven from trade concerns, turned negative after early gains. An index of the U.S. currency against several trading partners fell 0.12 percent. The Mexican peso gained 0.44 percent versus the greenback, while the Canadian dollar rose 0.05 percent.
Elsewhere in the global trade conflict, a deadline for public comment on Trump's increased tariffs on $200 billion of Chinese goods was less than a week away on Sept. 5. The White House has said it wants to settle NAFTA before negotiating with China.
"There's a big debate taking place among investors: is Trump hoping to reach agreement with all the big players to demonstrate what a successful negotiator he is, or is he trying to make sure he's got agreement with NAFTA and the EU and therefore can turn all the firepower on to China?" said Milligan.
Emerging market stocks rose 0.10 percent, but remained under pressure from weakening currencies. An index of those countries' currencies fell 0.29 percent in dollar terms.
Turkey's lira extended losses, down 2.08 percent against the dollar, a two-week low, as concern grew about the effects of the country's currency crisis, and Finance Minister Berat Albayrak was quoted as saying he did not see a risk to the economy.
Dollar-denominated Turkish bank bonds also fell after Moody's sounded the alarm over the sector.
Oil prices rose about 1 percent, supported by a drawdown in U.S. crude and gasoline stockpiles and news of falling Iranian crude shipments as U.S. sanctions deterred buyers.
U.S. crude rose 1.31 percent to $69.43 per barrel and Brent was last at $77.03, up 1.42 percent on the day.
Reporting by Trevor Hunnicutt; Additional reporting by Wayne Cole and Helen Reid; Editing by David Gregorio