GLOBAL MARKETS-Stocks climb, short-dated Treasury yields dip on bets for U.S. rate cut

* S&P 500 ends higher for 2nd day
* Two-year U.S. notes slip after ADP jobs data
* Oil slides; data shows surprise build in U.S. crude
stockpiles

(Updates with closing U.S. markets levels)
By Caroline Valetkevitch
NEW YORK, June 5 (Reuters) - Major world stock markets rose
and short-dated U.S. Treasury yields fell on Wednesday as
investors bet that the U.S. Federal Reserve would cut interest
rates and help boost a sluggish global economy.
Underscoring concerns over growth was a report by U.S.
payrolls processor ADP Wednesday that showed U.S. private
employers added only 27,000 jobs in May, well below economists'
expectations and the smallest monthly gain in more than nine
years. While a flare-up in trade tensions between the United States
and China hurt world stocks in May and triggered fears of an
impending recession, comments from Fed Chairman Jerome Powell
and other Fed officials this week have provided support for
stocks. The policymakers warned that the trade war may force the
Fed to respond, prompting investors to price in possible rate
cuts. Wednesday's ADP report comes two days ahead of the broader,
and more closely watched, jobs report from the U.S. Labor
Department.
"Today and yesterday the market was embracing the idea of
more weakness in the economy giving the Fed some cover to
preemptively cut rates. If the excuse evaporates with a strong
jobs number Friday the market might be disappointed by that,"
said Jeffrey Kleintop, chief global investment strategist at
Charles Schwab in Boston.
In the futures market, federal funds contracts implied
traders have priced in a 55% chance the Fed would reduce
borrowing costs by at least 75 basis points by year-end, up from
51% late Tuesday and 14% a week earlier, CME Group's FedWatch
tool showed.
In another positive for equities, Republican Senator Chuck
Grassley predicted the United States and Mexico would be able to
strike a deal to avert tariffs that U.S. President Donald Trump
has threatened to impose on Mexican imports. The Dow Jones Industrial Average .DJI rose 207.39 points,
or 0.82%, to 25,539.57, the S&P 500 .SPX gained 22.88 points,
or 0.82%, to 2,826.15, and the Nasdaq Composite .IXIC added
48.36 points, or 0.64%, to 7,575.48.
MSCI's broad gauge of stocks across the globe
.MIWD00000PUS was up for a third day, rising 0.7%. The
pan-European STOXX 600 index .STOXX rose 0.38%.
In the U.S. Treasuries market, yields on U.S. two-year notes
US2YT=RR - sensitive to traders' views on Fed policy - were
3.20 basis points lower, at 1.841%, after hitting 1.773%, the
lowest level since December 2017.
The spread between two- and 10-year yields US2US10=TWEB
grew to near 31 basis points, the widest in seven months.

The U.S. dollar was higher in late U.S. trading, reversing
early losses.
The dollar index .DXY , which tracks the greenback versus a
basket of six currencies, rose 0.261 points, or 0.27 percent, to
97.333. The Japanese yen weakened 0.27% versus the greenback at
108.45 per dollar.
Oil prices resumed their recent slide, extending losses
after data showing a surprise build in U.S. crude stockpiles.
U.S. crude CLcv1 fell 3.37% to settle at $51.68 a
barrel. Brent futures LCOc1 settled down $1.34, or 2.2%, at
$60.63.
Gold prices gained as the U.S. rate cut bets encouraged
investors to flock toward bullion. Spot gold XAU= was up 0.4%
at $1,329.57 per ounce. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
GRAPHIC-World FX rates in 2019 http://tmsnrt.rs/2egbfVh
GRAPHIC-MSCI All Country Wolrd Index Market Cap http://tmsnrt.rs/2EmTD6j
GRAPHIC-Emerging markets in 2019 http://tmsnrt.rs/2ihRugV
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