The FTSE 100 hit an 11-month high after uncertainty abated with the news that Theresa May would become the next prime minister of the UK.
The index, which measures the share prices of the 100 biggest companies in the UK, was trading up 0.17 per cent at 6,694.15 on Tuesday morning, after hitting 6,698.92, the highest level since August 2015.
That's 16 per cent higher than lows reached immediately after the referendum and more than 20 per cent higher that lows reached in February, when the low oil price and other commodity worries weighed on financial markets.
The pound was rising against the dollar on Tuesday, up 1.1 per cent at $1.3155, which is 2.8 per cent higher than the 31-year low hit in the week after the referendum.
Meanwhile the FTSE 250, which is made up of more domestically focussed companies, was up 1.01 per cent at 16,875.68.
Markets started rising on Monday after Andrea Leadsom retired from the Tory leadership race, clearing the way for Theresa May to become the next PM on Wednesday.
Ankit Gheedia, an equity and derivatives strategist at BNP Paribas, said that many see May as a "safe pair of hands".
“The difference between Theresa May and her counterpart was that she has a disciplined approach and a proper strategy for Brexit. The alternative was uncertain.
“We know she has experience, and is a bit more strategic, so the market is relieved on the back of that," Gheedia said.
Ken Odeluga, market analyst at City Index, said that markets haven't always reacted to the policial events of the last three weeks, but in this case, they seemed to be taking comfort.
"We note markets shrugged off revolving doors in the Conservative leadership contest and Labour’s failure to open a trapdoor under its own chief," Odeluga said.
"It has taken the withdrawal of the last right-leaning Eurosceptic standing, Andrea Leadsom, to raise an unmistakably positive reaction in the City," he added.
Investors turned their attention to Mark Carney's appearance at the Treasury Select Committee on Tuesday in case he let slip any clues about plans to cut interest rates below historic lows of 0.5 per cent.
"Mark Carney’s appearance in Westminster will also be under scrutiny to see if there are any further clues over Thursday’s interest rate announcement but for now the mood remains upbeat, driven by hopes that the post-Brexit fog is starting to clear," said Tony Cross, market analyst at Trustnet Direct.
