*

ADP report shows unexpected drop in private payrolls

*

UK gilt yields surge amid finance minister concerns

*

Dollar set to snap nine-session streak of declines

(Updates to US market close)

By Chuck Mikolajczak

NEW YORK, July 2 (Reuters) - Global stocks rose to a

record high on Wednesday after U.S. data showed an unexpectedly

weak 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.

"Employment softening and inducing the Fed to lower rates would

be a positive, but if it softens too much, that would be a

negative for growth and profits," said Jim Awad, senior managing

director at Clearstead Advisors LLC in New York.

On Wall Street, the S&P 500 and Nasdaq closed at record highs,

buoyed in part by a bounce in Tesla after the stock

dropped 5.3% on Tuesday. Tesla shares closed up 4.97% after the

electric automaker posted its quarterly deliveries.

The Dow Jones Industrial Average fell 10.52 points,

or 0.02%, to 44,484.42, the S&P 500 rose 29.41 points, or

0.47%, to 6,227.42 and the Nasdaq Composite rose 190.24

points, or 0.94%, to 20,393.13.

MSCI's gauge of stocks across the globe climbed

3.84 points, or 0.42%, to 921.24 after hitting an intraday

record of 922.27, while the pan-European STOXX 600

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 up 3.4 basis points at 4.283%.

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, or

gilt, was last up 16.8 basis points at 4.621%.

Sterling tumbled 0.83% to $1.3631 after dropping as much

as 1.35% and was on pace for its biggest daily percentage drop

since June 17.

The dollar index, which measures the greenback against a

basket of currencies, rose 0.13% to 96.76 and was on track to

snap a streak of nine straight declines, with the euro

off 0.03% at $1.1801.

President Donald Trump said on Wednesday the U.S. would place a

20% tariff on Vietnam, lower than initially announced as

investors await progress on deals with other countries. 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 Jim

Baird, chief investment officer at Plante Moran Financial

Advisors in Southfield, Michigan.

Investors were also eyeing 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 as it

works its way through Congress.

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 jumped 3.06% to settle at $67.45 a barrel and

Brent settled at $69.11 per barrel, up 2.98% on the day

as Iran suspended cooperation with the U.N. nuclear watchdog.