LONDON (AFP) - World shares rose Thursday (June 30) as Britain's central bank hinted at interest rate cuts to limit the impact of the country's vote to quit the EU, sending the British pound tumbling against the euro.

After a day of further political drama, London shares closed strongly higher with a late-session flurry, after Bank of England chief Mark Carney sought to reassure financial markets in the wake of last week's Brexit vote.

"The economic outlook has deteriorated and some monetary policy easing will likely be required over the summer," he said in a speech in central London.

Interest rate cuts usually boost a stock market because of hopes for rekindled growth and higher consumer spending. At the same time, they make holding a currency less attractive because of weaker returns.

As well as London, shares in Paris and Frankfurt rallied for a third straight day, rebounding from a heavy sell-off on the heels of Britain's shock EU decision that has even seen London wipe out all its post-vote losses.

London's benchmark FTSE 100 index closed 2.3 per cent higher, Paris' gains were 1 per cent, while the rise in Frankfurt was more muted, at 0.7 per cent.

Capital Economics economist Julian Jessop said "several plausible reasons" were behind why equity prices had recovered after the Brexit decision, some of which may be temporary.

"More positively, though, we think that the markets are right to recognise that Brexit, and especially some form of Brexit-lite, would not be as damaging as so many were arguing ahead of the referendum," he said in a note.

The British pound, meanwhile, fell to a two-year low against the euro after Carney's announcement. It was 83.8 pence per euro at 1515 GMT, surpassing the previous low reached on March 25, 2014.

The pound largely held on to most of its gains versus the dollar as other higher-yielding, riskier, currencies benefited from hope that the fallout from last Thursday's referendum will not be as bad as feared.

The pound slid to US$1.3234 but was still up from the 31-year-lows of US$1.3121 it touched on Monday.

The International Monetary Fund (IMF) on Thursday (June 30) said that Britain's shock EU vote had created uncertainty that poses a major threat to the global economy.

IMF spokesman Gerry Rice called on European leaders and other policymakers to take "decisive" actions that could lower the threat.

Further deepening the uncertainty, London's former mayor Boris Johnson, who spearheaded the Brexit campaign, on Thursday unexpectedly bowed out of the race to take over from Prime Minister David Cameron, an announcement greeted by a brief spike in the value of the pound.

His Brexit ally, Michael Gove, meanwhile, threw his hat in.

Cameron is due to stand down in a couple of months' time, with European leaders adamant that London will not win any concessions to gain access to the vast single market.

Asian stock markets also climbed.

Speculation that authorities will announce monetary easing measures to offset any negative impact have also provided strong support.

"The global central bankers are in the background and the markets realise that the central bankers are going to stand in front of any capitulation," Stephen Innes, a senior trader at Oanda Asia-Pacific, said in a note.

London - FTSE 100: UP 2.3 per cent at 6,504.33 9 (close)

Frankfurt - DAX 30: UP 0.7 per cent at 9,680.09 (close)

Paris - CAC 40: UP 1 per cent at 4,237.48 (close)

Eurostoxx 50: UP 1.15 per cent at 2,864.74

New York - Dow: UP 0.6 per cent at 17,806.55

Tokyo - Nikkei 225: UP 0.1 per cent at 15,575.92 (close)

Hong Kong - Hang Seng: UP 1.8 per cent at 20,794.37 (close)

Shanghai - Composite: DOWN 0.1 per cent at 2,929.61 (close)

Pound/dollar: DOWN at US$1.3234 from US$1.3455 Wednesday

Euro/dollar: DOWN at US$1.1045 from US$1.1124

Dollar/yen: UP at 102.92 yen from 102.80 yen