NEW YORK: A global stocks rally gathered steam Monday, fueled by economic optimism, while the British foreign minister's sudden resignation over Brexit depressed the pound.
Key European equity markets closed higher, extending last week gains after Friday's solid US jobs report boosted confidence in the American economy and helped soothe trade war nerves.
Wall Street built on opening gains throughout the morning, with the Dow finishing up an impressive 1.3 percent.
Analysts at Charles Schwab credited the US jobs report with fanning "global economic optimism" allowing investors to take a welcome breather from festering trade war concerns which have dogged markets for months.
And the optimism comes despite the fact Washington rolled out tariffs on $34 billion of Chinese goods Friday, sparking retaliatory measures from Beijing.
- Sterling yo-yo -
The British pound meanwhile had a rollercoaster session.
It rose initially on news that Prime Minister Theresa May's Brexit minister David Davis had resigned.
Analysts said the news persuaded many investors that Britain could be heading towards a so-called "soft" Brexit, and that took sterling to a one-month high against the dollar above $1.33.
But when Boris Johnson also resigned as foreign minister, the currency took an abrupt downward turn as the markets went into political crisis mode.
"There's been some swift downside seen in the pound in recent trade with the currency coming under pressure after another key politician has resigned," said David Cheetham, chief market analyst at XTB.
Calling Johnson's departure a "significant event from a market standpoint and something of a shock," Cheetham said the chances of a challenge to May's leadership "have now increased markedly."
Lukman Otunuga, a research analyst at FXTM, said fears of an early British general election had now crept into the market.
"Market uncertainty over Brexit has reached new heights after Boris Johnson resigned as Foreign Secretary this afternoon," Otunuga said.
- 'Heavy losses' ahead? -
Brexit uncertainty could well delay Bank of England interest rate increases, he said, expectations of which had been bolstering the pound.
"If expectations continue to diminish over the central bank raising UK interest rates, sterling is at risk of experiencing heavy losses down the road," he said.
Sterling's weakness, however, helped make London's FTSE stock market index the European star performer, as shares in British multinationals gained from a falling currency which typically boosts their bottom line.
US stocks for their part continued to push higher on Monday, with especially robust gains for Dow members Boeing and Caterpillar, two major exporters to China.
"You are one tweet away from all of this being turned on its ear," he said.
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