(Updates with close of European markets, adds details)

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ADP report shows unexpected drop in private payrolls

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UK gilt yields surge amid finance minister concerns

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Dollar set to snap nine-session streak of declines

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 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 fell 56.43 points,

or 0.13%, to 44,438.51, the S&P 500 rose 19.17 points, or

0.31%, to 6,217.23 and the Nasdaq Composite rose 163.36

points, or 0.81%, to 20,365.78.

MSCI's gauge of stocks across the globe rose

2.62 points, or 0.29%, to 920.02 after hitting an intraday

record of 920.24, 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 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, or

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

Sterling 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, 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

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 jumped 3.09% to $67.48 a barrel and Brent

surged to $69.10 per barrel, up 2.98% on the day as Iran

suspended cooperation with the U.N. nuclear watchdog.