UK's FTSE 100 climbs on banks boost; markets ponder PM Starmer's resignation

By Johann M Cherian and Shashwat Chauhan

June 22 (Reuters) - UK's FTSE 100 closed higher on Monday, with bank stocks leading the way as investors monitored developments in the Middle East peace talks while also pondering the implications of Prime Minister Keir Starmer's resignation.

The internationally focused FTSE 100 index closed 0.7% higher, while the midcap FTSE 250 ended flat.

"The signs are now that the successor to Keir Starmer will be in power in less than a month, which at least minimises the uncertainty for investors," Chris Beauchamp, chief market analyst at IG Group, said.

Greater Manchester mayor Andy Burnham, who won a seat in parliament last week, is seen as the frontrunner to take over the top job.

Any candidate will be scrutinized over fiscal policy plans at a time when concerns over debt-backed public spending has sent the yield on the benchmark 10-year gilt to its highest since 2008.

Heavyweight banks led gains on the blue-chip FTSE 100 with NatWest Group , Barclays and Lloyds all jumping more than 3% each.

Rate-sensitive household goods and home-construction stocks reversed their initial losses to close up 1.2%, as gilt yields fell across the board. The pound also rose 0.1% against the dollar.

Economic and political uncertainty, alongside geopolitical concerns, have weighed on the domestically focused midcap FTSE index, which underperforms the blue-chip FTSE 100 index this year.

Further afield, U.S. Vice President JD Vance said talks with Iranian officials in Switzerland had laid a "good foundation" for a final peace deal, despite tensions over the Strait of Hormuz and Lebanon.

In M&A news, easyJet rose 2.8% after Castlelake made public its £4.74 billion ($6.26 billion) takeover bid for the budget carrier. The airline has rejected three proposals from the U.S. investment firm.

Babcock International lost 5.9% after the defence and engineering group reported a 19% drop in annual underlying operating profit.

This week marks 10 years since Britain decided to leave the European Union.

(Reporting by Johann M Cherian and Shashwat Chauhan in Bengaluru; Editing by Joyjeet Das and Andrew Heavens)