How financial markets reacted as Andrea Leadsom pulled out of Tory leadership race

The pound spiked and equities rallied as Andrea Leadsom pulled out of the race to become the next Conservative Party leader, and, in turn, the next Prime Minister.

The announcement soothed financial markets, after political turmoil wreaked havoc on global markets since the Brexit vote last month. 

Sterling spikes

Before the announcement, the pound, which spent the morning below $1.29, spiked to an intraday high as traders said there was talk Leadsom was about to pull out of the Tory leadership race. 

The leadership contest which is due to be decided by September 9 would then leave the door open for Theresa May, who was in the "Remain" camp during the Brexit vote, as the only contender for the top job. 

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. The news that Leadsom was pulling out of the race for Conservative leadership, saw the pound spike by as much as 0.5pc, hitting an intraday high of $1.3012. At 3.30pm, it was changing hands at $1.2953, flat on the day. 

 FTSE 100 enters bull market territory

London's benchmark index also made gains on hopes Leadsom's withdrawal from the Leadership race would ease political tension, after the Brexit vote caused the blue chip index to plunge by more than 8pc in the aftermath of the Brexit vote. 

The FTSE 100, which had already rallied to 11-month highs, in early trade, pushed higher after Leadsom withdrew from the race for the job of Prime Minister. It is now trading up 1.25pc at 6,672.97 - its highest level since August 11 last year. 

The latest leg up brings the FTSE 100's gains from its February low to 20.1pc. This means the blue chip index is now in bull market territory, thanks to the post-Brexit pound slide which has lifted the index. 

 FTSE 250 jumps 3pc

The domestically focused FTSE 250 also welcomed Leadsom's decision to withdraw from the leadership race. She said that Theresa May is best placed to negotiate Brexit talks, sending the mid-cap index to a two-week high of 16,673.63, up 3.1% on the day.

However, the index is still down about 4 percent since a close on June 23 on concerns about a negative impact on the UK economy following last month's vote in Britain to leave the European Union.