Update: The pound has fallen after prime minister Theresa May agreed to set a timetable for her departure as prime minister in the first week of June.
Sterling dropped half a cent to $1.28 against the dollar, with the boost to the FTSE 100's international earners helping the FTSE 100, which had spent much of the morning in the red, swing into gains. The UK blue-chip index closed 57 points, or 0.8%, higher at 7,354.
Graham Brady, chairman of the 1922 Committee of Conservative backbenchers, said after a meeting with the prime minister that May had agreed to set a timetable for the election of a new party leader after parliament votes on Brexit legislation again in the first week of June.
Former foreign secretary Boris Johnson has confirmed he will stand for the leadership.
Michael Hewson, chief market analyst at CMC Markets UK, pointed to today's fall as the eighth day in a row the pound had been down against the euro.
'It is becoming increasingly clear that we appear to be in the dying embers of Theresa May's premiership and the pound's slide appears to be reflecting that as the fight begins to step into her shoes,' he said.
Neil Wilson, chief market analyst at Markets.com, said the Conservative party machinations were weighing on sterling.
'Quite whether it's entirely market scepticism about BoJo or just a general fear due to the uncertainty pervading Westminster today is unclear, but for sure the market is consciously decoupling from the pound amid heightened risks for Brexit and the stability of the government.'
(11:16) Huawei ban weighs on FTSE
The FTSE 100 was knocked by the US blacklisting Chinese telecoms business Huawei, while tour operator Thomas Cook (TCG) slumped on another profit warning.
The UK blue-chip index lost 8 points, or 0.1%, at 7,289, as US President Donald Trump reignited trade tensions by placing restrictions on Huawei buying technology in the US and barred its equipment from US telecoms networks on grounds of national security.
This followed Trump downplaying tensions, describing the tit-for-tat tariffs dispute as ‘a little squabble’.
Virginie Maisonneuve, Eastpring Investments chief investment officer, suggested Trump's ratcheting up of tensions was not only a response to China's growing technological power but also played to his electoral base.
‘It's not only in terms of the size of the economy but… it's ultimately about competitiveness around technology, which is the ultimate global competitiveness in five or 10 years etc,’ she said.
‘My analysis of politics in the US, is that volatility has played into Trump's hands historically. Volatility generally creates fear that perhaps some of the electorate in the US feel Trump is better to able to deal with.’
Asia-focused stocks retreated as a result, with HSBC (HSBA) down 1% to 656p. Luxury fashion brand Burberry (BRBY), which had suffered under trade tensions, gave up 4% at £18.45 on lacklustre full-year results.
The FTSE 250 added 52 points, or 0.3%, at 19,422, with cyber security firm Sophos (SOPH) surging 13% to 384p after posting a jump in full-year profits and revenues despite a ‘challenging’ year.
Thomas Cook was the biggest faller among small caps, diving 16% to 19p, after warning that economic and political uncertainty would affect profits this summer.
‘While the seasonal nature of their business means travel companies are nearly always loss-making in the first half of their financial year, booking a £1.5bn loss is something else entirely,’ AJ Bell investment director Russ Mould said.
‘Speculation over an emergency fundraise, which mounted at the end of 2018, is only likely to ramp up from here despite the company’s plan to flog off its airline operations.’
This dragged down its FTSE 100-listed rival TUI (TUI), which slipped 2.9% at 796.2p.