US STOCKS-Wall Street set to jump after payrolls data

* Sept. payrolls at 103,000 vs 60,000 forecast

* Moody's downgrades two British banks

* S&P 500 resistance seen at 50-day moving avg 1,180

* Futures up: Dow 69 pts, S&P 7.9 pts, Nasdaq 10.25 pts

* For up-to-the-minute market news see [STXNEWS/US] (Updates with payrolls data)

By Edward Krudy

NEW YORK, Oct 7 (Reuters) - U.S. stocks were set to open higher on Friday, extending a three-day rally after more jobs were created than expected in September, helping to ease concerns the economy was heading back into recession.

Nonfarm payrolls rose by 103,000, while economists expected a gain of 60,000, and the unemployment rate held steady at 9.1 percent, The government report also showed 99,000 more jobs were added in July and August than initially reported. For details, see [ID:nOAT004877]

While the report was not as strong as many investors wanted, it corroborated other mildly improved economic data that have helped to ease fears the global economy was weakening.

"This is critical, this is the most important data that we have seen this cycle," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "This is going to get people's attention."

"This confirms that most of the negativity we have seen in the market is derived from the market itself and not the data," he said.

S&P 500 futures were up 7.9 points and above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 69 points, and Nasdaq 100 futures added 10.25 points.

Investors will keep their eyes on Europe. Optimism the region was ramping up efforts to resolve its sovereign debt crisis helped drive a 6 percent rally in the S&P 500 over the last three sessions.

Germany and France were split ahead of crucial summit talks on Sunday over how to strengthen shaky European banks and fight financial market contagion to prepare for a possible Greek default, diplomats said Friday. [ID:nL5E7L714R]

On Thursday. the European Central Bank said it was ready to buy bonds to provide longer-term cheap money for European lenders in need of funding.

From a technical perspective, the S&P 500 remained in a downtrend. The index has been trapped in a range in the past few months, deteriorating into lower lows. The index's wide range is seen from about 1,100 to 1,250.

Analysts see the next important resistance level for the S&P 500 at 1,180, the index's 50-day moving average. The S&P closed at 1,164.97 on Thursday.

Adding to concerns about European banks, Moody's cut its credit ratings on British banks Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc and said it expected the U.K. government would have to continue to support the country's systemically important banks. [ID:nWLA6879]

(Editing by Jeffrey Benkoe)