The pound has rallied as investors priced in the prospect of a delay to Brexit after MPs dealt Prime Minister Theresa May a second historic defeat to her deal with the EU last night.
Parliament rejected May's revised deal by 391 votes to 242 yesterday, triggering a vote later today on a no-deal Brexit.
Investors expect parliament to vote overwhelmingly against leaving the EU without a deal, setting up a vote on a delay for Thursday.
The pound rallied, recouping yesterday's losses, to trade nearly a cent higher against the dollar at $1.317.
'I would strongly expect that parliament rejects no-deal by a large majority,' said Stephanie Kelly, senior political economist at Aberdeen Standard Investments.
'That really sets the stage for approval of an extension of Article 50 by the end of the week. Sterling should perform well in this scenario as the technical risk of no-deal subsides.'
ING economist James Smith said: 'One way or another, an extension to the Article 50 period looks likely'.
'With only a matter of days to go now until 29 March, it seems likely that parliament will back a delay, but there's still a big question mark over exactly how long it might last.'
The FTSE 100, meanwhile, shrugged off the pound's rise and the dent to overseas earnings to trade nine points higher at 7,161.
After a strong rally in early trading yesterday, stocks exposed to the UK domestic economy gave up some of those gains.
Oil majors Shell (RDSb) and BP (BP) rose 22p to £23.82 and 1.1% to 542.3p, respectively, buoyed by a rise in the price of Brent crude, up 0.8% to $67.20 a barrel, amid ongoing supply cuts from the Opec cartel and US sanctions against Iran and Venezuela.
Standard Life Aberdeen (SLA) shares climbed 2.9% to 252.1p on news co-chief executive Martin Gilbert would be stepping down.
AJ Bell investment director Russ Mould believed the move would drive speculation that Gilbert’s ‘days are numbered’ at the firm.
The company’s full-year results were a ‘shocking’ read, he added, with a decline in profit, huge outflows from its funds and no increase in the dividend.
‘At the moment the focus still appears to be on cost cutting rather than driving the business forward. That needs to change.
‘The decision to stop having two chief executives is definitely a good start as it should bring a tighter focus at the top of the company.’
Morrisons (MRW) shares weakened by 0.7% at 223.5p, even though the supermarket announced plans to pay a special dividend as revenues grew but profits fell.
Among mid-cap stocks, Avast (AVST) shares dipped 5.4% to 291.2p, after Vince Steckler, who had been chief executive at the cyber security firm for a decade, announced plans to retire.
Outsourcing giant Capita (CPI) fell 3.3% to 117.4p as a result of an unsolicited bid by Australia’s Corporate Travel Management (CTD.AX) for its travel business.
Provident Financial (PFG) dipped a penny to 562.4p despite announcing a swing into profit and the resumption of its dividend, as the troubled doorstep lender reiterated its opposition to a Neil Woodford-backed bid by Non-Standard Finance (NSF).