GLOBAL MARKETS-Stocks edge up to record, gilt yields surge on finance minister uncertainty

By Chuck Mikolajczak

NEW YORK, July 2 (Reuters) - Global stocks advanced on Wednesday after U.S. data showed a surprisingly soft reading on the labor market while British government bond yields surged on growing speculation about the future of the country's finance minister.

The ADP National Employment Report showed private payrolls dropped by 33,000 jobs last month after a downwardly revised 29,000 increase in May and well below the 95,000 increase expected by economists polled by Reuters.

The data comes ahead of Thursday's government payrolls report, although there is little, if any, correlation between the two. Also on tap for Thursday are weekly initial jobless claims.

Market expectations for a July rate cut by the U.S. Federal Reserve climbed to just over 27% after the data, up from 20.7% in the prior session, according to CME's FedWatch Tool.

"You take it as an additional data point and you throw it in the 'doesn't look good' column, and then you look to tomorrow which is going to be arguably much more meaningful," said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Southfield, Michigan.

On Wall Street, the S&P 500 and Nasdaq climbed, buoyed in part by a bounce in Tesla TSLA.O after the stock dropped 5.3% on Tuesday. Tesla shares were last up 4.7% after the electric automaker posted its quarterly deliveries.

The Dow Jones Industrial Average .DJI fell 56.43 points, or 0.13%, to 44,438.51, the S&P 500 .SPX rose 19.17 points, or 0.31%, to 6,217.23 and the Nasdaq Composite .IXIC rose 163.36 points, or 0.81%, to 20,365.78.

MSCI's gauge of stocks across the globe .MIWD00000PUS rose 2.62 points, or 0.29%, to 920.02 after hitting an intraday record of 920.24, while the pan-European STOXX 600 .STOXX index closed up 0.18%, lifted by renewable energy and luxury stocks.

Longer-dated U.S. Treasury yields rose, with the benchmark U.S. 10-year note US10YT=RR up 4.9 basis points at 4.298%.

British government bond yields surged, at one point jumping nearly 23 basis points, the most since October 2022, after finance minister Rachel Reeves appeared visibly distressed in parliament, a day after the government sharply scaled back plans to cut benefits.

The yield on the 10-year government bond GB10YT=RR, or gilt, was last up 16.8 basis points at 4.621%.

Sterling GBP= tumbled 0.84% to $1.3628 after dropping as much as 1.35% and was on pace for its biggest daily percentage drop since June 17.

The dollar index =USD, which measures the greenback against a basket of currencies, rose 0.19% to 96.82 and was on track to snap a streak of nine straight declines, with the euro EUR= down 0.1% at $1.1793.

President Donald Trump said on social media on Wednesday that the U.S. has struck a trade deal with Vietnam. He had previously said he was not considering extending the deadline for countries to negotiate trade deals, even as negotiations with top trade partner Japan failed to make headway, although he expected a deal with India.

"The Vietnam-U.S. trade deal that was announced obviously alleviates one piece of the uncertainty puzzle around trade, not only because of the direct impact, but also perhaps as an indicator that there's more to come here over the coming week or so, all of which would help to alleviate what's been a major source of uncertainty for the last three months," said Baird.

Investors were also watching for signs of progress in Trump's massive tax and spending bill - which is expected to add $3.3 trillion to the national debt, slash taxes and reduce social safety net programs.

Republicans in the House of Representatives teed up a procedural vote on the bill that could reveal whether the party has enough support to pass it out of Congress.

U.S. crude CLc1 jumped 3.09% to $67.48 a barrel and Brent LCOc1 surged to $69.10 per barrel, up 2.98% on the day as Iran suspended cooperation with the U.N. nuclear watchdog.