Global Stocks Hit Record Highs as Gilt Yields Surge Amid UK Finance Minister Uncertainty

Global markets witnessed a dramatic day as stocks soared to record levels while British government bond yields spiked, driven by weak U.S. labor data and political jitters in the UK. The rally in equities and volatility in bond markets are shaping a narrative of investor optimism tempered by deep-rooted macroeconomic and political uncertainty.

U.S. Job Data Sparks Fed Rate Cut Speculation

In a surprise development, the ADP National Employment Report showed private payrolls fell by 33,000 jobs in June, far below expectations of a 95,000 increase. The May figures were also revised down to a mere 29,000 gain.

Although the ADP data often diverges from the official U.S. government jobs report (due Thursday), it sent a clear signal: the labor market is weakening. This caused a notable shift in rate cut expectations, with the likelihood of a Federal Reserve July rate cut rising to 27%, up from 20.7% a day earlier, 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.

Wall Street Rally: Tesla Leads the Charge

The S&P 500 and Nasdaq Composite closed at record highs, powered in part by a strong rebound in Tesla stock after disappointing the day before.

• S&P 500 rose 0.47% to 6,227.42

• Nasdaq Composite jumped 0.94% to 20,393.13

• Tesla shares gained 4.97% after its Q2 deliveries impressed investors

• Dow Jones slightly dipped by 0.02% to 44,484.42

Global Markets React

The MSCI All-Country World Index (.MIWD00000PUS) climbed 0.42%, reaching a record 921.24, while Europe’s STOXX 600 closed up 0.18%, led by gains in renewable energy and luxury sectors.

UK Political Unrest Rattles Gilt Market

British gilt yields experienced their sharpest rise since October 2022, surging nearly 23 basis points at one stage. This came after Finance Minister Rachel Reeves appeared distressed in Parliament, following the government's abrupt decision to scale back planned benefit cuts.

• UK 10-year gilt yield closed at 4.621%, up 16.8 basis points

• Sterling tumbled 0.83% to $1.3631, its largest drop since June 17

Currency & Commodity Moves

• U.S. Dollar Index rose 0.13% to 96.76, halting a nine-day losing streak

• Euro slipped slightly to $1.1801

• Crude oil prices spiked as Iran suspended nuclear cooperation:

  • WTI crude: +3.06% at $67.45

  • Brent crude: +2.98% at $69.11

Trump’s Trade Update & Fiscal Agenda

Adding more complexity, President Donald Trump announced a 20% tariff on Vietnam, softening earlier rhetoric. He emphasized ongoing but tough negotiations with Japan and India, keeping markets alert.

Meanwhile, Trump’s massive tax and spending bill—set to add $3.3 trillion to the national debt—advanced through Congress. The proposal includes steep tax cuts and reduced welfare programs, triggering debate within the GOP.

“The Vietnam-U.S. trade deal… alleviates one piece of the uncertainty puzzle around trade,” said Jim Baird, CIO at Plante Moran Financial Advisors.

Takeaway: Opportunity or Overheating?

Markets are walking a tightrope between hopeful rate cuts, worrying job data, UK fiscal unrest, and geopolitical developments. The rally in equities reflects optimism about monetary policy easing, but the sharp rise in bond yields and currency volatility show investors are preparing for turbulence ahead.

Stay tuned for Thursday’s official U.S. payroll report and further developments in the UK government and U.S. trade policy.