UK stocks rally before dropping as Prime Minister Liz Truss resigns

The blue-chip FTSE 100 gained as much as 0.4% but quickly erased the gains and was last down 0.1% as the pound rose 0.3%

UK's main stocks indexes hit session highs before paring gains on Thursday after Liz Truss said she was resigning as Prime Minister, brought down by her economic programme that sent shockwaves through the financial markets.

The blue-chip FTSE 100 gained as much as 0.4 per cent but quickly erased the gains and was last down 0.1 per cent as the pound rose 0.3 per cent.

The battered FTSE 250 index, more exposed to the domestic economy, gained 0.4 per cent after jumping as much as 1 per cent earlier.

Truss was forced to abandon almost all of her policy programme earlier this week after it caused a bond market rout, and a collapse of her approval ratings and those of her Conservative Party.

A leadership election will be completed within the next week.

Also Read | Liz Truss resigns as UK PM after short, rocky stint

"It was not unexpected, but the fact they would not even keep her in power until the 31 October fiscal statement shows how desperate they were to get rid of her," said Stuart Cole, head macro economist at Equiti Capital.

"But who would want the job now? The markets have largely dictated the direction economic policy has to take and will leave a new PM with little room for manoeuvre in that area."

"The Bank of England has clearly won the tug of war with her now of out office. It now gives the Bank of England the much of a free reign right now to focus on inflation," said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.