Financial markets rallied as it was announced Rishi Sunak would be the UK's the next prime minister, after Boris Johnson and Penny Mordaunt withdrew from the race to lead the Conservative Party.
Investors had largely already expected a Mr Sunak victory before it was officially announced on Monday.
In a brief statement, Mr Sunak said Britain faced a “profound economic challenge” and would work to increase stability and unity.
Mr Sunak, a former chancellor, is regarded as a fiscal conservative and his nomination appears to have been broadly welcomed by investors in the City of London.
"It seems that the announcement was pretty well priced in by this point, especially after sterling’s notable gains at the Asia open last night," said Michael Brown, head of market intelligence at Caxton.
"Having said that, Sunak taking over as PM should restore a significant amount of credibility around UK policy, which is likely to limit downside for sterling assets in the near term."
Shares on the FTSE 100 index of London’s biggest companies initially rose by as much as half a per cent, before falling to nearly 0.8 per cent down by late morning.
In the afternoon the FTSE recovered again, rising by 1.1 per cent, hitting 7,045 points. The pound initially dropped in value against the dollar after the confirmation but about an hour later it spiked.
Rishi Sunak wins battle to become UK prime minister - in pictures
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Britain's new Prime Minister Rishi Sunak delivers a speech outside Number 10 Downing Street. Reuters -
King Charles III invites Mr Sunak to become prime minister and form a new government in an audience at Buckingham Palace. PA -
Mr Sunak promised to bring stability amid what he called a “profound economic crisis”. PA -
The new prime minister is applauded as he enters Number 10. Photo: Simon Walker/ No 10 Downing Street -
Mr Sunak is greeted by Cabinet Secretary and Head of the Civil Service Simon Case as he enters 10 Downing Street. AFP -
A worker loads a removal van with boxes outside 10 Downing Street. Reuters -
Members of the public wait for the arrival of Mr Sunak near Downing Street. AP -
Staff in the Foreign and Commonwealth Office watch from the windows as Mr Sunak arrives in Downing Street. PA -
An Indian artist in Mumbai creates a painting to congratulate Mr Sunak on becoming prime minister. EPA -
Mr Sunak arrives at Buckingham Palace. PA -
Incoming prime minister Rishi Sunak arrives at the Conservative Party's headquarters with a wave. AFP -
Rishi Sunak is greeted by colleagues upon his arrival. AFP -
Conservative MPs applaud as Rishi Sunak arrives. Reuters -
Rishi Sunak departs after making a statement inside the Conservative Party's headquarters. PA -
Mr Sunak meets the 1922 Committee in Parliament after he was announced as the new leader of the Conservative Party when Penny Mordaunt dropped out. PA -
Sir Graham Brady, chairman of the 1922 Committee, announces Mr Sunak as the new leader of the Conservatives and therefore the prime minister. PA -
Members of the media work outside No 10 Downing Street, the official residence of Britain's prime minister, in central London, as they await announcements. AFP -
Mr Sunak leaves his campaign office in London. AP -
A billboard of Liz Truss, the departing prime minister, in London. Bloomberg -
Members of the public look through the gates into Downing Street. Reuters -
Mr Sunak leaves his home in London on Monday morning. AFP -
Leader of the House of Commons and Conservative leadership candidate Penny Mordaunt speaks to the media on Sunday. Ms Mordaunt pulled out of the race moments before the deadline for nominations. PA
At about 3pm one pound could buy a little more than $1.13, up 0.25 per cent on the day.
Gilt yields fell sharply, thanks to a sense of relief among investors over the outlook for Britain's finances. Benchmark 10-year yields fell 28 basis points to 3.774 per cent, nearing their lowest so far this month.
BlackRock, the world's largest asset manager, in a weekly note said Britain's fiscal credibility had improved, but the damage inflicted by Ms Truss's "mini-budget" in late last month had not been completely reversed.
In the end Mr Sunak was the only remaining candidate for the position, after Penny Mordaunt dropped out and Boris Johnson did not declare his candidacy.
