Pound spikes and FTSE 100 charges into bull market territory – how markets reacted to news of a new PM

Traders across the City said Andrea Leadsom’s withdrawal from the Tory leadership race and Cameron’s announcement that he will resign on Wednesday triggered a relief rally worldwide, reports The Telegraph.

Since the Brexit vote, global stocks have been rattled by political turmoil in the UK. However, now traders are hopeful May will provide stability during Brexit negotiations, given her “less contentious relationship with the EU” than her former rivals.

On currency markets, the pound hit an intraday high of $1.3018, before finishing the trading session at $1.2968, up 0.11 per cent on the day.

Earlier, the pound floundered below $1.29 on expectations the Bank of England will slash interest rates on Thursday.

However, as the rumourmill went into overdrive that Leadsom was about to pull out of the Tory leadership race, sterling surged above $1.30.

Traders in the City said that with May at the helm it would ease political turmoil and provide some relief for the pound, which has been hammered since the Brexit vote.

Since Britain voted to leave the EU, the pound has languished at 31-year lows, plunging 13.5 per cent. In the period from June 21 to July 8, the pound suffered its worst three weeks since the currency’s 1992 crisis, when Britain fell out of the pre-euro Exchange Rate Mechanism.

London’s FTSE 100 rallied 92.22 points, or 1.4 per cent, to 6,682.86; its highest level in 11-months.

It also technically entered bull market territory, climbing by 20.7 per cent from its February 11 nadir of 5,537.

However, Mike van Dulken, of Accendo Markets said: “Far from being a nice steady trend higher, investors have had to weather a rally of 17 per cent through end-April followed by an 11pc decline to Brexit day lows, before rebounding by an impressive 16 per cent in just over two weeks.”

The rally has also been helped by the pound slide which has lifted the index, as more than 70 per cent of the FTSE’s revenues come from outside the UK.

European bourses also cheered May’s victory, with Frankurt’s DAX and the CAC in Paris advancing by 2.1 per cent and 1.8 per cent, respectively. In the US, the S&P 500 soared to a record intraday high of 2,140 points.