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The FTSE 100 added more than 90 points and sterling rebounded off two-year lows after news that UK Prime Minister Boris Johnson intends to step down as party leader following a chaotic 48 hours for his premiership.
The FTSE 100 index was up 91.45 points, or 1.3%, at 7,199.22. The FTSE 250 index was up 149.79 points, or 0.8%, at 18,744.27. The AIM All-Share index was down 1.61 points, or 0.2%, at 872.98.
The Cboe UK 100 index was up 1.4% to 717.83. The Cboe 250 was up 1.1% at 16,290.56, while the Cboe Small Companies was flat at 13,153.30.
In mainland Europe, the CAC 40 stock index in Paris the DAX 40 in Frankfurt were up 1.6%.
‘Although investors will be watching closely to see who emerges as a potential successor and will be longing for some stability, the FTSE 100 is nonetheless putting on a decent show and delivered some strong gains on Thursday morning,’ AJ Bell analyst Russ Mould commented.
Miners and oil majors propped up the FTSE on Thursday, more than offsetting share price falls for housebuilder Persimmon and gambling stocks.
Sterling ticked back above the $1.20 mark. The pound fetched $1.2003 midday Thursday in London, up from $1.1917 late Wednesday.
The pound's gains have been somewhat unconvincing though, as UK political uncertainty may not be over.
Johnson eyes remaining as prime minister until a successor is in place, expected to be by the time of the Conservative Party conference in October.
However, some Tory MPs may prefer him to leave the post sooner.
It has been a disastrous 48 hours for the scandal-dogged PM, as the row over the Chris Pincher scandal unleashed a wave of pent-up frustration with his leadership.
A mass resignation was triggered by Tuesday's departure from Cabinet of Rishi Sunak and Sajid Javid, as chancellor and health secretary, respectively.
Pantheon Macroeconomics analyst Samuel Tombs commented: ‘The positive but muted market reaction to Johnson's reported resignation - sterling has appreciated a touch - is consistent with our view that a new PM might have a positive impact on EU relations and on supply side policies. These policy pivots, however, are by no means certain, given that the economic policy views of many of the leading candidates aren't known, and the race appears to be wide open, with betting markets giving no potential candidate more than a 20% chance of winning.’
The euro stood at $1.0195 midday Thursday London time, up a touch from $1.0192 late Wednesday. Against the yen, the dollar was trading at JP¥135.88, up from JP¥135.56.
Away from UK political turmoil, traders will have their eye on central bank moves. Minutes from the latest European Central Bank are released at 1230 BST.
They follow the US Federal Reserve's, which showed US central bank policymakers reaffirmed their commitment to combating elevated levels of inflation, even at the risk of damaging economic growth.
US equities are called higher on Thursday. The Dow Jones Industrial Average is called up 0.4% and the S&P 500 and Nasdaq Composite are both pointed 0.3% higher.
In London, mining stocks were the best blue-chip performers, boosting the FTSE 100.
Anglo American rose 7.2%, Glencore added 7.0% and Rio Tinto climbed 4.7%.
Shell and BP rose 2.7% and 5.0% respectively as the former expects to book an impairment reversal of up to $4.5 billion on an improving commodity price outlook. It also forecasts a boost between $800 million and $1.20 billion to its Products division due to an improving indicative refining margin.
Brent oil was quoted at $101.09 a barrel, up from $99.67 at the London equities close on Wednesday.
Struggling, however, were gambling stocks. Ladbrokes owner Entain slumped 12% as it lowered annual guidance, while Paddy Power operator Flutter lost 5.9% in a negative read-across.
For 2022, Entain now expects flat online net gaming revenue, excluding impacts from the upcoming UK Gambling Act Review. It had previously forecast mid to high single digit growth.
Houosebuilder Persimmon fell 4.5%. It said half-year revenue and legal completions were lower, though forward sales are on the up and it expects to report an improved gross margin for the six months to June 30. Its operating margin will take a hit, however.
Revenue was down 8.2% to £1.69 billion in the first half of 2022 from £1.84 billion a year earlier. Completions have fallen to 6,652 from 7,406. Completions were below expectations due to ‘further delays in the planning system and material and labour shortages’.
Currys added 7.5% as profit nearly quadrupled in its most recent financial year, but the consumer electronics seller warned that its outlook is ‘uncertain’ as inflationary pressures mount.
Currys reported that revenue was down 2% to £10.12 billion in the year to April 30, from £10.33 billion last year. It added that store sales increased by 24% as the company benefited from looser pandemic restrictions, although this was offset by online sales declining 29%.
Pretax profit almost quadrupled to £126 million, compared to £33 million in its financial year 2021.
Currys also said that it will pay a full-year dividend of 3.15p per share, up 5% on the year before.
The company said that it is experiencing inflationary pressures which are being passed onto its customers. As well as prices of goods increasing due to the value of the sterling, operating costs are climbing ‘dramatically’ with the rise of energy and fuel costs, it said.
Jet2's outlook is also clouded, the AIM-listed airline and tour operator warned. Jet2 shares slumped 14%.
The firm said it has been hit by broader disruption across the travel sector despite investing ‘well ahead’ of the summer 2022 season.
‘Many suppliers have been woefully ill-prepared and poorly resourced for the volume of customers they could reasonably expect, inexcusable, bearing in mind our flights have been on sale for many months and our load factors are quite normal,’ Jet2 said.
It added that passengers have faced flight delays, baggage handling problems and lack of onboard catering facilities.
As such, its performance in the 2023 financial year depends on how fast the broader aviation sector returns to ‘some level of stability’.
Further, Jet2 said that prices are likely to come under ‘some’ pressure, as inflationary pressures mount.
Private hospital operator Mediclinic surged 7.8% to 476.80 pence.
Bloomberg reported a consortium is mulling upping its takeover bid for Mediclinic.
In June, Mediclinic rejected an unsolicited offer by SAS Shipping Agencies Services - a consortium comprised of Johannesburg-listed investment firm Remgro and MSC Mediterranean Shipping. The consortium had tabled a bid of 460 pence per share, plus Mediclinic's proposed final dividend for financial 2022 of 3p.
Mediclinic said a 'put up or shut up' deadline has been extended to the close of play on August 4.
Gold stood at $1,741.44 at midday Thursday, up from $1,738.77 late Wednesday.
Still to come on the economic events calendar on Thursday is the US ADP jobs report at 1315 BST and latest jobless claims numbers at 1330 BST.
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