Europe open: Stocks rise as investors welcome removal of UK political uncertainty

European stocks rose in early trade as investors continued to welcome the removal of political uncertainty in the UK.

At 0900 BST, the benchmark Stoxx Europe 600 index was up 0.3%, while Germany’s DAX and France’s CAC 40 were 0.5% higher.

Stocks had racked up healthy gains on Monday as it emerged that Theresa May was set to succeed David Cameron as Prime Minister this week.

In Asian trade, Japanese shares rose sharply as the yen slumped after Prime Minister Shinzo Abe promised to stimulate the country’s economy. Abe’s ruling party and coalition won a majority in upper-house elections and he said he wants “the swift formulation of comprehensive, bold economic measures.”

Ahead of Thursday’s Bank of England rate announcement, investors will be watching out for Governor Mark Carney’s appearance in front of MPs at 1000 BST with other members of the Financial Stability Committee to answer questions about the central bank’s recent measures to ensure orderly markets.

Given the recent volatility in financial markets, expectations of an interest rate cut are mounting.

CMC Markets’ Michael Hewson said: “It is this expectation that has helped push the pound to new 31-year lows against the US dollar as markets bet heavily on some form of move as early as this week. The market is currently pricing a 80% probability of a rate cut this week of 25 basis points, and while I would not be surprised to see rates go down further, I strongly suspect that we might see rates remain on hold this week, particularly now that the political picture has become much more stable given that Theresa May is likely to be in place as the new Prime Minister by then.”

He added: “Mark Carney has already indicated that the Bank remains ready to act to keep credit conditions flexible, and he has by and large done that, and that to my mind is more important than the level of the headline rate.”

In European corporate news, Shire rallied after the US Food and Drug Administration approved its lifitegrast eye drops for treating signs and symptoms of dry eye disease.

Daimler was also a high riser after the car maker’s second-quarter results beat analysts’ expectations.

Oil prices were in the black on Tuesday, with West Texas Intermediate up 0.7% to $45.08 a barrel and Brent crude 0.9% firmer at $46.65.