Swirling rumours of a mutiny against UK prime minister Theresa May spooked the markets on Wednesday, sending the pound and Brexit-sensitive stocks downwards.
Shares in areas of the economy particularly sensitive to Brexit — including UK housebuilders, retailers, and airlines — tumbled during the day on fears her resignation could spark a more damaging rupture with Europe.
The FTSE made marginal gains as sterling slid towards a four-month low on Wednesday, before the pound pared back some of the losses. It appears investors began to bet May’s departure could help break the Brexit deadlock.
May faces intense pressure to quit from within her own party as the backlash grows over her plans for compromise with the opposition to push through a Brexit deal.
Ministers Sajid Javid, Jeremy Hunt, David Mundell, and Penny Mordaunt are all reported to have warned May on Wednesday that they cannot support her "new" Brexit agreement, which was seen by some as a veiled push for her to resign.
But the prime minister is reported to have turned down requests to meet cabinet ministers on Wednesday night, casting doubt on rumours of any imminent resignation.
Several journalists at leading media outlets reported that she may make a statement outside Downing Street on Wednesday evening, but government sources then said there were no such plans ahead of European elections on Thursday.
Tom Tugendhat, the Conservative chair of the foreign affairs committee, said Wednesday afternoon the PM had to go “without delay,” because her attempts to resolve the Brexit crisis had “comprehensively failed.”
The anger within cabinet in particular was reportedly down to her stated willingness to legislate for a second referendum if parliament backs one.
Many of May’s critics were also conspicuously absent from the House of Commons when the Conservative leader addressed MPs on Wednesday.
The prime minister had begun a last-ditch bid to win over opposition MPs this week with a “bold, new” offer on the Brexit deal she needs their backing for.
She offered a vote on a second referendum and closer trading arrangements with the EU in the hope of securing support for her fourth attempt to get a Brexit agreement through parliament.
But the moves not only fuelled anger on her own side, but were also rebuffed by most opposition parties.
Labour leader Jeremy Corbyn said the government was "too weak, too divided to get this country out of the mess that they have created."
May herself openly referred to her time-limited premiership at prime minister’s questions in parliament earlier on Wednesday afternoon, telling MPs, "In time another prime minister will be standing at this despatch box.”
“For the market [May’s possible departure] opens up the prospect of more uncertainty, the potential of a Brexiter PM, a general election, and perhaps a second referendum,” Neil Wilson, chief markets analyst at Markets.com, said.
Fiona Cincotta of City Index warned the pound could dip towards $1.20 if a pro-Brexit leader replaced May.
Meanwhile traders’ interest in government bonds, typically less lucrative but crucially seen as less risky, crept upwards on Wednesday.
UK 10-year government bond yields were on track for their largest one day fall since 21 March, down more than six basis points on the day to 1.02% just after 4pm on Wednesday.
Britain’s path towards Brexit, scheduled for 31 October if not earlier, continues to looks as uncertain as it has for much of the three years since the EU referendum.