The governor of the Bank of England sent bond yields to fresh record lows and the pound sliding after he signalled more quantitative easing and indicated interest rates would be cut to cushion the economy from the impact of Brexit.

The prospect of lower interest rates, already at historical lows, and a return of the Bank of England's bond-buying programme to stimulate the economy sparked a sell-off of sterling but lifted shares. In London yesterday the pound dropped 1.5 per cent against the dollar to $1.324, a cent above the 31-year low that it hit in the immediate aftermath of the referendum.

Meanwhile, yields on some gilts turned negative for the first time, with investors effectively paying to stow their money in two-year British bonds in anticipation of lower interest rates.

The FTSE 100 rose 144.27 points, or 2.2 per cent, to 6,504.33, taking it beyond its pre-Brexit level and to its best reading since last year. The FTSE 250, which is considered a better reflection of British economic prospects because of its more domestic composition, also rose, 1.7 per cent, although it remains 6 per cent below its close on the eve of the referendum results.

On Wall Street last night the Dow Jones industrial average climbed 235.31 points to close at 17,929.99, boosted in part by the prospect of further stimulus from the UK's central bank.

Late Wednesday, Boris Johnson and Michael Gove, who led the campaign for Britain to leave the European Union, had their arms around each other at a Conservative Party fundraiser at the Hurlingham Club, a members-only hangout in West London.

Mr. Johnson, London’s former mayor, went to bed expecting to announce the next morning his intention to enter the race to become the next prime minister, with Mr. Gove, the current justice secretary, as his co-chair.

But the next morning—in a tumultuous turnabout—it was Mr. Gove who entered the race for a job he had long insisted he didn’t want and wasn’t equipped for, saying he lacked confidence in Mr. Johnson. Shortly after that, Mr. Johnson delivered a speech to reporters in which he highlighted his achievements as mayor and spoke about unifying the country, betraying nothing before delivering what he called the punchline.

The Bank of England could unleash fresh monetary stimulus this summer in an effort to support the economy after Brexit, Mark Carney has said, in remarks taken as a sign that policymakers are preparing to slash interest rates and release additional waves of quantitative easing (QE).

In his first full speech since his reassuring remarks when the referendum result was declared, the Governor warned that the vote to leave the European Union had increased uncertainty about the outlook for the UK economy, given the "major regime shift" that leaving the bloc entailed.

Ahead of the vote, Mr Carney had said that the monetary policy committee (MPC), which decides on monetary policy, had judged that there would "probably" need to be an increase in rates over the next three years.

However, Mr Carney now says "some monetary policy easing will likely be required over the summer". The pound fell by as much as 1.6pc on the Governor's remarks, to $1.3219. Experts predicted last night that the MPC was likely to make its move in August.

The Bank of England is preparing to unleash another round of monetary stimulus as it battles to contain the economic fallout of the UK's decision to leave the EU.

In a stark warning to politicians, governor Mark Carney said a downturn was on its way and Britain was already suffering from "economic post-traumatic stress disorder".

He said the central bank would take "whatever action is needed to support growth", which probably included "some monetary policy easing" in the next few months, in an attempt to reassure the markets and the general public. But Mr Carney also said that central bankers could do only a limited amount to mitigate the pain.

Sterling fell more than 1 per cent to $1.32 as traders began preparing either for rates to be cut to historic lows, more quantitative easing, or a combination of both. The pound hit $1.50 just before the first results were known of the referendum on EU membership last week. Equities rose, with the FTSE 100 index closing up 2.3 per cent on the day.