By Caroline Valetkevitch
NEW YORK (Reuters) - Major world stock markets edged higher and the U.S. Treasuries market resumed its recent rally 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 (NASDAQ:ADP) Wednesday that showed U.S. private employers added 27,000 jobs in May, well below economists' expectations and the smallest monthly gain in more than nine years.
A flare-up in trade tensions between the United States and China hurt world stocks in May and triggered fears of an impending recession.
Yields on U.S. two-year Treasury notes - sensitive to traders' view on changes in Fed policy - hit their lowest since December 2017 following the ADP data. The inversion between U.S. 3-month bill rates and 10-year yields continued for a ninth straight session.
"The ADP number does raise some concerns about the further impact of tariffs. It adds to the case of interest rate cuts, the odds of that happening are going up," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
Comments from Fed Chairman Jerome Powell and other Fed officials this week helped limit equity market losses as they warned the trade war may force them to respond, prompting investors to price in possible rate cuts.
Interest rate futures show the U.S. central bank will start cutting rates as soon as next month, with as many as three rate cuts priced by year-end.
The benchmark S&P 500 and Dow indexes were trading higher while the Nasdaq turned lower by late morning.
The Dow Jones Industrial Average rose 108.36 points, or 0.43%, to 25,440.54, the S&P 500 gained 5 points, or 0.18%, to 2,808.27 and the Nasdaq Composite dropped 6.19 points, or 0.08%, to 7,520.93.
MSCI's broad gauge of stocks across the globe was up for a third day, gaining 0.35%. The pan-European STOXX 600 index rose 0.20%.
In the U.S. Treasuries market, benchmark 10-year notes last rose 5/32 in price to yield 2.1054%, from 2.121% late on Tuesday.
Earlier, Germany's 10-year bond yield reached a record low and Italian debt held on to this week's gains as investors ramped up their bets on a generous loan package for banks in the euro zone as well as a U.S. rate cut.
The U.S. dollar weakened further in the wake of the recent Fed comments.
The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.107 points or 0.11%, to 96.965. The yen was last down 0.11% at $108.0200.
Oil prices resumed their slide, extending losses after data showing a surprise build in U.S. crude stockpiles.
U.S. crude fell 2.51% to $52.14 per barrel.