The previous session was dominated by surging government borrowing costs, which triggered particularly heavy losses across banks, housebuilders and other rate-sensitive shares.
Some pressure eased overnight as US Treasury yields retreated from their multi-decade highs.
The benchmark US 10-year Treasury yield was holding near 5.25%, after reaching approximately 5.34% on Thursday, its highest level since 2002.
Wall Street also stabilised, with the S&P 500 gaining 0.2%, while the Dow Jones Industrial Average and Nasdaq Composite finished fractionally higher.
Asian markets remained mixed ahead of the US employment report. Japan’s Nikkei fell 0.9% and Hong Kong’s Hang Seng dropped 2.7%, while Australia’s ASX 200 gained 0.4% and South Korea’s Kospi advanced 0.2%.
Mainland Chinese markets remained closed for a holiday.
Commodity markets were relatively stable. Brent crude eased 0.1% to US$102.19 a barrel, while West Texas Intermediate fell 0.3% to US$92.61.
Gold gained 0.4% to US$4,218.65 an ounce, while copper advanced 0.7%.
Bitcoin also strengthened, rising 2.2% to around US$86,041.
The main event for global markets is the US non-farm payrolls report, where September employment growth is expected to slow to approximately 90,000 jobs, from 162,000 in August, while unemployment is forecast to remain at 4.1%.
For investors, the significance of the jobs report extends well beyond the labour market. A stronger-than-expected number could revive expectations for tighter Federal Reserve policy and send Treasury yields back towards Thursday’s highs, potentially reversing the early improvement in equity sentiment.
A softer report could instead help bond yields retreat further and provide additional support to rate-sensitive equities.
The expected FTSE rebound therefore represents only a partial recovery from Thursday’s losses. The more important test is whether the recent surge in global borrowing costs has peaked or resumes following the US employment data.
