Boris Johnson won't run for PM: how the race shapes up now

Boris Johnson will not seek to succeed David Cameron as Conservative Party leader and Prime Minister of Britain.

His shock announcement leaves two main candidates in the race: home secretary Theresa May, who favoured remaining in Europe, and justice minister Michael Gove.

The 48-year-old Mr Gove is a surprise candidate.

He was a close ally of Mr Johnson during the "Brexit" campaign but overnight NZ Time released a statement saying:

I respect and admire all the candidates running for the leadership. In particular, I wanted to help build a team behind Boris Johnson so that a politician who argued for leaving the European Union could lead us to a better future.

But I have come, reluctantly, to the conclusion that Boris cannot provide the leadership or build the team for the task ahead.

Mr Gove had been a Boris-for-PM supporter. His shock defection is thought to have influenced the former London mayor's decision to pull out.

Left to right: Gove (48), Johnson (52), May (59)

Markets, which have been recovering over the past couple of days, rallied further on the news.

The FTSE closed up 2.27%, European markets made similar gains and US markets were in the green in late trading.

Mrs May was an ally of David Cameron but regarded as further to the right.

Although she was in the "Remain" camp, she was a relatively low-key voice during the referendum campaign.

Regardless, her candidacy will give pro-Europe supporters a ray of hope. Some say a vote in the House of Commons on Brexit or a snap election could be a first step in Britain backing away from the referendum result, which was non-binding.

Mr Gove's nomination follows a mini-scandal, which saw the leaking (after an auto-fill blunder) of an email from his wife Sarah Vine in which she hectored him — with frequent deployment of ALL CAPS —  to seek reassurances from Mr Johnson before supporting him.

EMAIL IN FULL: Here is the Sarah Gove email to Michael Gove about @BorisJohnson and leadership. pic.twitter.com/4PPv1ud4IM

— Darren McCaffrey (@DMcCaffreySKY) June 29, 2016

In the message, Ms Vine claims that News Corp head Rupert Murdoch and Daily Mail editor Paul Dacre "have an instinctive dislike  of Boris."

Mr Gove duly discovered his own instinctive dislike for his former friend and ally.

Before his surprise entry, Mrs May was widely seen as the second-strongest candidate after Mr Johnson.

But there are also three others in the race. Energy Minister Andrea Leadsom (who campaigned for "Leave"), backbench MP Liam Fox ("Leave") and work and pensions secretary Stephen Crabb ("Remain").

Meanwhile, the opposition Labour Party remains in a state of chaos.

The party officially campaigned for "Remain" but leader Jeremy Corbyn took a Euro-skeptic stance.

Following the referendum, and the sacking of the high-ranking Hilary Benn (who was agitating for a no-confidence vote), more than half of his shadow cabinet quit. Mr Corbyn now seems on the ropes, but it is not clear who will replace him, or when.

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