The Brexit gloom lifted helping boost the shares of Irish banks and property firms, as well as the owner of Paddy Power, as investors bet the risk of a crash-out Brexit had receded for the time being.
Analysts said the defection of Tory MPs that led to the huge vote defeats of Boris Johnson in the Commons on Tuesday and Wednesday will likely stop Mr Johnson pursuing his threat to take Britain out of the EU without a deal at the end of next month.
His government's mini-budget or spending review was largely ignored by investors on the basis that Mr Johnson's government may not be in power long enough to implement any new spending pledges.
Meanwhile, ratings firm DBRS said that a no-deal Brexit could re-spark political violence in Ireland. Sterling rose to $1.219 and, against the euro, to 90.45 pence, but which only brought it back to levels of late July, when Mr Johnson was first talking up his no-deal threat. Irish shares most exposed to the British economy and the fortunes of sterling rose in a limited relief rally.
Global stock markets also benefitted as Hong Kong said it won't pursue the proposed law that led to street protests there in recent weeks. AIB and Bank of Ireland -- which are in the front line of the economic havoc a hard Brexit would cause the British and Irish economies -- rose by 4.5% and 3%. The two Irish stockmarket homebuilders, which have had a torrid time because of Brexit, also rallied: Cairn Homes and Glenveagh both rose by 3%.
Shares in Flutter, which owns Paddy Power and Betfair, gained 2.5% on hopes of a boost for its British earnings, and Irish Ferries-owner ICG rose 1.5%, as sterling gained. Cider and beer maker C&C, which relies on British sales, also rose, by 1%. As MPs inflicted their second defeat on Mr Johnson on Wednesday evening, investors said the Brexit pressures had not passed.
"Boris Johnson is unable to pursue a no-deal option, but if he cannot hold an election stalemate will descend," said Chris Beauchamp, chief market analyst at online broker IG. He added that Mr Johnson's government's spending review pledges were ignored "since the decisions could easily be undone following a general election".
Ratings firm DBRS reminded international investors of the potential consequences of a no-deal Brexit for Ireland, warning that "beyond the economic risks, DBRS considers the security and political risks to Ireland in a no-deal Brexit scenario to be of significant consequence".
"A no-deal Brexit poses a risk to the Belfast Agreement that could possibly reawaken security concerns, including the resumption of sectarian violence," it said.
DBRS also said that a no-deal Brexit could lead to Scottish independence and was "the most likely cause of a breakup of the UK".
"The Scottish government has proposed a second referendum on independence. The first referendum in September 2014 was rejected by 55% of voters. Reportedly, that outcome was influenced by concerns that Scotland would lose its EU membership. Should the UK leave the EU without an agreement, that consideration would no longer stand in the way," DBRS said.
It added: "In the event that the UK leaves the EU, DBRS expects that calls for Scottish independence would become even louder, especially in a no-deal scenario."