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July 6 (Reuters) - UK stock markets on Wednesday rebounded from a sharp sell-off, with exporter-heavy FTSE 100 benefiting from a weakness in sterling as economic worries were compounded by a crisis in Boris Johnson's government.
The FTSE 100 rose 1.2% to recover from its worst session in three weeks, boosted by shares of dollar earners such as AstraZeneca, Diageo and Unilever.
Britain's pound hit a more than two-year low against the dollar as Prime Minister Boris Johnson clung to power despite the resignations of key cabinet members and other ministers and lawmakers from their roles.
A weak pound has supported the export-heavy FTSE 100 this year despite spiralling inflation and growing concerns of a recession.
"Questions over how long the Johnson administration is going to be hanging around for is putting pressure on the pound. Given that the FTSE is a fairly international index, whenever the British pound performs poorly, stocks typically do well," said David Madden, market analyst at Equiti Capital.
"The outlook for UK equities is still bearish. It is really a double whammy for the UK market as both economic and political uncertainty prevail."
The more domestically focused FTSE 250 index added 1.5% after hitting a fresh 2020 low in the previous session.
Worries about a recession has hammered the midcap index, down nearly 21% this year as the Bank of England tries to curb inflation that is likely to hit double digits later this year.
BoE chief economist Huw Pill said he would be open to voting for a larger move in interest rates than the 0.25 percentage point steps favoured so far by the central bank, if economic circumstances warrant.
British banks such as HSBC, Standard Chartered and Barclays fell between 0.4% and 2.3% after the BoE warned the economic prospects for Britain and the world had darkened since the start of the year and told banks to ramp up capital buffers.
Globally, investors focused on the Federal Reserve's minutes later in the day that should provide insight on the U.S. central bank's June meeting, where it announced the sharpest hike in the U.S. benchmark interest rate in nearly 30 years.
Trainline surged 20.6% after the online ticketing group said there was a faster-than-expected recovery in the number of train passengers across Europe, prompting it to raise its annual outlook. 0.2
Asset manager Abrdn jumped 5.1% on launching a share buyback programme worth 300 million pounds ($359.16 million).
