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Stocks reach record highs, and gilt yields soar on uncertainty about the Finance Minister

Global stocks rose on Wednesday, after U.S. labor data revealed a surprising soft reading. Meanwhile, British government bond yields soared amid growing speculation over the future of Britain's finance Minister.

ADP's National Employment Report shows that private payrolls fell by 33,000 last month, after a downwardly-revised 29,000 job increase in May. This is well below the 95,000 jobs expected by economists surveyed by.

The data is released ahead of the government's payroll report on Thursday, but there is very little correlation between them. On Thursday, we will also see the weekly initial claims for unemployment. The market's expectations of a rate cut in July by the U.S. Federal Reserve increased to 27% following the release, from just under 20% the previous session, according CME's FedWatch Tool.

"You throw it into the 'doesn’t look good' section and then look forward to tomorrow, which will arguably be much more significant," said Jim Baird. Chief investment officer at Plante Moran Financial Advisors, Southfield, Michigan. The S&P 500, Nasdaq, and Dow Jones all rose on Wall Street. This was partly due to a rebound in Tesla stock after it dropped by 5.3% Tuesday. Tesla shares rose 4.7% last after the electric carmaker announced its quarterly deliveries.

The Dow Jones Industrial Average dropped 56.43 points or 0.13% to 44,438.51, while the S&P 500 climbed 19.17 points or 0.31% to 6,217.23; and the Nasdaq Composite jumped 163.36 points or 0.81% to 20,365.78. The MSCI index of global stocks rose 2.62 points or 0.29% to 920.02, after reaching an intraday high of 920.24. Meanwhile, the pan-European STOXX 600 closed with a 0.18% gain, boosted by renewable energy stocks and luxury stocks.

The yields on longer-dated U.S. Treasury notes rose. The benchmark 10-year U.S. note was up 4.9 basis point at 4.298%. British government bond rates surged at one point, jumping almost 23 basis points. This was the highest since October 2022. The jump came after Finance Minister Rachel Reeves, who appeared visibly upset in parliament a day after the Government dramatically scaled back its plans to reduce benefits, spoke out.

The yield of the 10-year Government Bond, or gilt was up 16.8 basis point at 4.621%.

The pound fell 0.84%, to $1.3628. It had dropped as high as 1.35%. This was the biggest percentage decline since June 17.

The dollar index (which measures the greenback versus a basket) rose by 0.19% at 96.82, and was on course to end a nine-day decline streak.

On Wednesday, President Donald Trump announced on social media that the U.S. had reached a deal with Vietnam. He said previously that he would not consider extending the deadline to negotiate trade agreements, even though negotiations with Japan, his top trading partner, had failed to progress. However, he still expected to reach a deal with India.

Baird said that the announcement of a Vietnam-U.S. Trade Deal "clearly alleviates a piece of the puzzle of uncertainty around trade. Not only because of its direct impact but also as an indication that more is to come in the next week or two, which will all help to relieve what has been causing uncertainty over the past three months." Investors also watched for progress on Trump's massive spending and tax bill, which is expected add $3.3 trillion to national debt and cut taxes. Republicans in the House of Representatives have scheduled a procedural voting on the bill, which could reveal if the party has the support it needs to pass the bill out of Congress. U.S. crude rose 3.09% to $67.38 a barrel while Brent soared to $69.10 a barrel, an increase of 2.98% in one day. This was due to Iran suspending its cooperation with the U.N. Nuclear Watchdog.

(source: Reuters)