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Stocks rise after ADP is weak, and gilt yields soar on Finance Minister's worries

Global stock markets were essentially unchanged following U.S. labor market data that showed a surprising weak reading. Meanwhile, British government bond yields soared amid speculation over the future of Britain's finance ministry.

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 payrolls report on Thursday, but there is very little correlation between them.

The FedWatch Tool of CME says that after the release of the data, the market expectations for a rate cut in July by the U.S. Federal Reserve increased to just over 27 percent, up from 20,7 percent the previous session.

"I see it as a mixed bag. One hand, wages are still high, which is important for the U.S. economic system. If this is not seasonality, it is the beginning of an overall trend for white collar jobs, said Ross Mayfield. Investment strategist at Baird, Louisville, Kentucky.

Wall Street saw a modest increase in the S&P 500, Nasdaq, and Dow, thanks in part to a rebound in Tesla, after its stock fell 5.3% on the previous day. Tesla shares rose 4.5% last after the electric carmaker reported its quarterly deliveries.

The Dow Jones Industrial Average rose 138.79 or 0.69% to 20,341.01. The S&P 500 gained 13.84 points or 0.22% to 6,211.70, and the Nasdaq Composite increased 138.79 or 0.69% to 6,211.70.

Investors were looking for signs of a trade deal ahead of U.S. president Donald Trump's tariff deadline of July 9. The pan-European STOXX 600 rose by 0.09%.

The yield on the benchmark U.S. 10 year note rose 4.8 basis points, to 4.297%. However, the yields of the shorter-term notes fell after the ADP report.

The yield on the 2-year bond, which is usually in line with expectations of interest rates for the Federal Reserve fell by 0.9 basis points, to 3.768%.

After Finance Minister Rachel Reeves, who appeared visibly upset in Parliament, had scaled back the government's plans to reduce benefits, yields on British government bonds surged. At one point, they jumped nearly 23 basis points. This was the highest since October 2022.

The yield of the 10-year Government Bond, or gilt was up by 11.5 basis points to 4.572%.

The sterling fell 1.17%, to $1.3584. This was the biggest percentage decline since April 7.

The dollar index (which measures the greenback versus a basket currencies) rose by 0.44% at 97.06, and was on course to end a nine-day streak of declines.

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

Investors are also looking for progress on Trump's tax and spending bill, which will add $3.3 trillion to national debt and cut social safety net programs. The bill is now heading to the House of Representatives. Republican leaders have scheduled a procedural vote at 1300 GMT on the bill.

Brent crude rose 0.18% to $67.23 a barrel as Iran halted its cooperation with the U.N. Nuclear Watchdog. A surprise increase in U.S. oil supplies capped gains.

(source: Reuters)