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Markets calm after Brexit shock, despite fractured Conservative Party


​The UK's stunning decision to leave the European Union has understandably dominated many of the headlines over the last week, with experts, politicians and economists all having their say on what Brexit will mean for Britain's immediate and long-term future.

The markets appeared to make up their own minds shortly after the decision was announced, with the FTSE 100 plummeting and the pound dropping to its lowest level against the dollar since the 1980s.

It was not until the following Monday that chancellor George Osborne spoke publicly about the result, although the panic gripping the market on the back of the result may well have played a part in forcing his hand.

Despite warning that a Brexit would require the government to put together a new budget that would likely spark further austerity measures in order to deal with the predicted shortfall, Osborne found himself in a position of having to quell the panic that spread across global financial world.

Breaking his silence on Monday, Osborne insisted the British economy is “about as strong as it could be to confront the challenge our country now faces", adding that he had already been in contact with a number of other financial ministers across the Europe, as well as the United States Treasury secretary and the International Monetary Fund.

However, reassurances were not backed up by any official announcements, which may be something to do with that fact that prime minister David Cameron's resignation is likely to be the main focus of the Conservative party for the next few months, as it searches for a candidate capable of guiding the country through an exit from the EU that was voted for by its people.

Cameron's resignation looked to have initially paved the way for former Mayor of London Boris Johnson to take Westminster's top job, but the story took another unexpected twist with Johnson announcing on Thursday (June 30th) that was not going to stand.

Former education secretary Michael Gove and Theresa May have been both touted as the possible front-runners for the top job, despite the former stating back in 2012 that he was not interested in the position.

Fast-forward to this week and Gove has now thrown his hat into the ring due to an apparent lack of faith in close friend Johnson's own ability to do the job, stating: "I have come, reluctantly, to the conclusion that Boris cannot provide the leadership or build the team for the task ahead. I have, therefore, decided to put my name forward for the leadership."

Johnson's decision to pull out of the race has undoubtedly sent shockwaves throughout his party and indeed the rest of the UK's political landscape, and has arguably overshadowed the financial recovery seen within the FTSE 100 this week.

Despite the political musical chairs within the Conservative government, the index has recovered all of the ground it had lost in the wake of last week's Brexit vote, closing Thursday up 3.6 per cent at 6,360.1 following a flurry of last-minute trading.

The results were slightly up on those recorded before the vote last Thursday, where it ended the day at 6,338.10.

Further gains were seen on Friday, with the index up by around 0.8 per cent midway through the afternoon, suggesting that investors are perhaps coming to terms with a post-Brexit Britain.

Chris Beauchamp, senior market analyst at spread betting firm IG told the BBC: "The plethora of bargains on offer, plus a welcome period of calm in the UK/EU relationship has provided the opportunity for markets to recover in impressive fashion."

Yet despite the improved performances of markets around the world, there is still a strong feeling of uncertainty over what the future may hold.

The pound has continued to struggle throughout the week, while Chancellor Osborne announced on Friday that the government was now set to abandon its goal of restoring its finances to a surplus by 2020, which had previously been one of the key drivers of austerity.

In a speech on Friday, Mr Osborne said: "As the governor [of the Bank of England] has said: the referendum is expected to produce a significant negative economic shock to our economy. How we respond will determine the impact on jobs and growth."

"We must provide fiscal credibility, continuing to be tough on the deficit while being realistic about achieving a surplus by the end of the decade. That's exactly what our fiscal rules are designed for."

As the first week of a post-Brexit Britain comes to a close, there are arguably more questions than answers.