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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 9-session streak of declines

(Updates with open of US markets)

By Chuck Mikolajczak

NEW YORK, July 2 (Reuters) - Global stocks were roughly

unchanged after U.S. data showed a surprisingly 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.

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.

"I take it as a mixed bag. On one hand, the wage is

still strong, which is terribly important to the U.S. economy.

On the downside, if this isn't seasonality, this is the

beginning of a long-term trend in white collar jobs that'll

spill over into the total labor market," said Ross Mayfield,

investment strategist at Baird in Louisville, Kentucky.

On Wall Street, the S&P 500 and Nasdaq were modestly

higher, buoyed in part by a bounce in Tesla after the

stock dropped 5.3% on Tuesday. Tesla shares were last up 4.5%

after the electric automaker posted its quarterly deliveries.

The Dow Jones Industrial Average fell 41.48

points, or 0.09%, to 44,453.72, the S&P 500 rose 13.84

points, or 0.22%, to 6,211.70 and the Nasdaq Composite

rose 138.79 points, or 0.69%, to 20,341.01.

MSCI's gauge of stocks across the globe rose

1.39 points, or 0.15%, to 918.79 and was on track for its fourth

gain in the past five sessions, while the pan-European STOXX 600

index rose 0.09% as investors looked for signs of trade

deals ahead of U.S. President Donald Trump's July 9 tariff

deadline.

Longer-dated U.S. Treasury yields rose, with the benchmark

U.S. 10-year note up 4.8 basis points to 4.297%,

while the shorter-end was lower after the ADP data.

The 2-year note yield, which typically moves

in step with interest rate expectations for the Federal Reserve,

fell 0.9 basis points to 3.768%.

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 11.5 basis points at 4.572%.

Sterling tumbled 1.17% to $1.3584 and was on pace for

its biggest daily percentage drop since April 7.

The dollar index, which measures the greenback

against a basket of currencies, rose 0.44% to 97.06 and was on

track to snap a streak of nine straight declines, with the euro

down 0.33% at $1.1766.

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.

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 - as it now heads to the House of

Representatives. Republican leaders set an initial procedural

vote on the bill at 1300 GMT.

U.S. crude ticked up 0.03% to $65.47 a barrel and

Brent rose to $67.23 per barrel, up 0.18% on the day as

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

a surprise build in U.S. crude supplies limited gains.