LONDON: The British pound wobbled Friday after Prime Minister Theresa May announced her resignation, while stock markets mostly rebounded as US President Donald Trump offered an "olive branch" to China in their trade war, dealers said.
Sterling sank below $1.27 after May said she would step down on June 7 as prime minister, paving the way for a contest to replace her.
The fall was contained, however, as the likelihood of May's departure had been mostly factored into prices -- although the Conservative party's choice to succeed her remains a worrying unknown.
"The pound will bounce around here and there but it won't be going anywhere fast," Forex.com analyst Fawad Razaqzada told AFP.
"A lot now depends who will be the next leader of the Tories."
The currency could face fresh turmoil, with key Brexiteer and former foreign minister Boris Johnson the front-runner to replace May.
Ratings agency Moody's warned that news of May's departure "amplifies the uncertainty" over Britain's withdrawal from the European Union -- and "increases the risk of a no-deal Brexit".
- Olive branch -
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Elsewhere, Europe's major share markets rebounded after the previous day's sharp-selloff sparked by the China-US trade war and global economic worries.
But Wall Street's Dow index, while also higher, had given up most of the 100 points it gained at the opening bell by the late New York morning, failing to offset much of the previous day's heavy downturn.
Sentiment brightened somewhat after Trump declared that there is a "good possibility" Washington will reach an agreement with Beijing to end their trade conflict, adding that "it's possible that Huawei would be included in a trade deal".
Fiona Cincotta, analyst at trading firm City Index, said that equities had won support on "Trump's trade olive branch" to China.
"President Trump's softening stance on Huawei and more positive comments on the US-China trade negotiations helped" markets move higher, she added.
However, investors remain anxious over ongoing European Parliament elections that could see big gains for populist forces.
Global equities had slumped Thursday in what one analyst called a "perfect storm" of Europe elections, fresh economic gloom, May's decision to delay a key Brexit vote and the China-US trade war.
Trump's remarks have however sparked hope of a breakthrough at the next G20 gathering in Japan next month.
Tensions between China and the US have ramped up ever since Trump banned Chinese telecoms giant Huawei from the US market and prevented American firms from selling to it.
After a stronger start, oil prices suffered another bout of weakness, extending the huge falls suffered the day before over concerns about the impact of the trade war on energy demand.
Uncertainty on trading floors fuelled a rally in bonds this week, with yields on the 10-year Treasury touching their lowest level in 19 months, indicating rising demand for the safe-haven assets.
- Key figures around 1540 GMT -
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Pound/dollar: UP at $1.2690 from $1.2657 at 2100 GMT
Euro/pound: DOWN at 88.30 pence from 88.34 pence
Euro/dollar: UP at $1.1209 from $1.1181
Dollar/yen: DOWN at 109.30 yen from 109.61 yen
London - FTSE 100: UP 0.7 percent at 7,277.73 points (close)
Frankfurt - DAX 30: UP 0.5 percent at 12,011.04 (close)
Paris - CAC 40: UP 0.7 percent at 5,316.51 (close)
EURO STOXX 50: UP 0.7 percent at 3,350.70
New York - Dow: UP 0.2 percent at 25,535.60
Tokyo - Nikkei 225: DOWN 0.2 percent at 21,117.22 (close)
Hong Kong - Hang Seng: UP 0.3 percent at 27,353.93 (close)
Shanghai - Composite: FLAT at 2,852.99 (close)
Oil - Brent Crude: DOWN 30 cents at $67.46 per barrel
Oil - West Texas Intermediate: DOWN 04 cents at $57.51