The FTSE 100 surprised to the upside in early trading on Friday, skipping 17 points or 0.25% higher rather than making the subdued start expected.

Leading the gains were blue-chip stocks related to travel and energy themes, with British Airways owner IAG (LSE:IAG) top of the leaderboard and aeroplane engine supplier Rolls-Royce (LSE:RR.) not far behind.

Royal Dutch Shell (LSE:RDSB), a day after saying that soaring gas and power prices will significantly boost its cashflow in the third quarter, and rival BP (LSE:BP.) were also near the top.

After wild swings earlier in the week, gas prices have retreated to levels that are “still insanely high” but at least lower, says market analyst Marshall Gittler at BDSwiss.

“Despite the fallback in gas prices, oil managed to climb even further after the US Energy Department said that it has no plans ‘at this time’ to tap the nation’s oil reserves nor to ban exports of crude oil.

“That followed remarks the day before from Energy Secretary Granholm that “all tools are on the table” to counter surging gasoline prices.”

Among the main fallers were miners Antofagasta (LSE:ANTO) and Glencore (LSE:GLEN), together with housebuilders Persimmon (LSE:PSN) and Barratt Developments (LSE:BDEV).

However, London’s positive mood follows similar upbeat sentiment in Asia, as China returned from its long holiday and the Caixin services PMI printed a surprise expansion in activity in September.

“All eyes are on today’s US jobs data,” says market analyst Ipek Ozkardeskaya at Swissquote, with the US ADP employment report earlier in the week giving investors hope that we may see a strong Non-Farm Payrolls report today too.

“The data is important because it will help with shaping expectations on what the Federal Reserve (Fed) could do next. We all know that the Fed is about to announce a start date for tapering its bond purchases, and reasonably soft data won’t get the Fed to change its mind. Only a shockingly low figure could do that – a figure below 100,000 for example, which would warn of an alarming slowdown in US labour market recovery.

“But even then, the Fed can’t do much, given that the latest spike in energy prices continues boosting inflation expectations, and the high inflation needs to be addressed quickly, perhaps more quickly than the depressed jobs market.”

6.40am: Subdued start predicted

US jobs data for September is due out later today and to the surprise of few, traders appear hesitant to commit ahead of the release.

Spread betting quotes indicate the FTSE 100 will open little changed, despite a storming session for US equities yesterday.

The Dow Jones average surged 338 points to close at 34,755 while the S&P 500 hit 4,400 with a 36 point gain.

Weekly jobless claims dropped to 326,000 last week from 364,000 the week before, reversing much of the increase in recent weeks, which Pantheon Macroeconomics thinks was triggered by Hurricane Ida.

Pantheon is expecting today’s jobs number for September to be +600,000, with the unemployment rate little changed, “though much depends on whether labour participation rebounded”.

The market consensus is for an increase in payrolls of around 500,000, with an unemployment rate of 5.1%.

The return of several hundred thousand relatively low-paid people into leisure and hospitality jobs should limit the increase in hourly earnings to 0.3%, according to Pantheon; the consensus forecast is for a 0.4% increase in hourly earnings.

In Asia this morning, Japan’s Nikkei 225 is up 483 points at 28,161 but Hong Kong’s Hang Seng is off 65 points at 24,636.

“Japan has formally pencilled in October 31st for a snap lower house election. Newly installed Japan Prime Minister Kishida has also announced instructions to his cabinet to compile economic stimulus measures for an extra budget to be submitted after the election. Following a positive debt sticking plaster session from Wall Street equities, news that the hoped-for fiscal goodie bag has been confirmed has seen the Nikkei 225 soar by over 2.0% this morning. I do note though, that the Nikkei is now as subject to the fast-money whims as US markets these days, and a very high Non-Farm print tonight could evaporate today’s rally on Monday,” opined Jeffrey Halley at Oanda.

“China markets have returned from a week-long holiday and inevitably Evergrande, and what to do with it, will resurface once again. Another medium-sized China property company defaulted on an offshore bond this week, and there is no sign of Evergrande or its subsidiaries, US Dollars for offshore holders of debt so far either. That said, the whole mess is likely to be overshadowed today by the Caixin Services PMI, which rebounded sharply in September to 53.4, as Covid restrictions were eased. The Composite PMI rising to 51.4 as a result. With markets this week having an investment horizon as far as their big toes, the short-term positives from the PMIs are lifting Mainland equities higher to start the day,” Halley reported.

The Shanghai Composite was up 9 points at 3,577.

On the corporate scene in the UK, Electrocomponents PLC (LSE:ECM) ends the week with a trading update coming after an impressive 37% jump in revenue in the first quarter.

The distributor of industrial and electronics products continued to see good market share gains across its key regions, thanks to its product availability, strong service solution and digital offer compared to the smaller competition.

“Management back in July was guiding to a slowdown in top-line growth in the balance of the year due to a combination of supply chain constraints reducing product availability and customer demand. We see no reason for this to have changed since then,” said Peel Hunt.

Around the markets

  • Sterling: US$1.3600, down 0.16 cents
  • 10-year gilt: 1.082%, up 0.65 basis points
  • Gold: US$1,757 an ounce, down US$2.20
  • Brent crude: US$82.92 a barrel, up 97 cents
  • Bitcoin: US$53,742, down US$463

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