Egypt's benchmark stock exchange rose 1.53 percent on Tuesday as investors reacted to a barrage of political news, led by the country's military council accepting the resignation of its top general, Field Marshal Abdel Fatah El-Sisi.
The council said in a recorded audio statement on Monday it had no choice but to "respect the wishes of the people to nominate him for the presidency". El-Sisi, who oversaw the ousting of former president Mohamed Mursi last summer after unprecedented street protests, is expected to announce his presidential campaign formally in the coming days.
Earlier this week, it emerged that Egypt will hold presidential elections before a parliamentary vote, most likely in March or April.
However, events on Tuesday morning underscored the pervasive political tensions in the country. Mohamed Said, a general in the police force and senior aide to the minister of interior, was assassinated in a drive-by shooting in central Cairo.
(Read more: Egyptians vote in tense poll on new constitution)
The incident may turn out to be a continuation of an insurgency by a Sinai-based fundamentalist Islamist group targeting the nation's security apparatus. Known as Ansar Bait Al-Maqdis, the group also claimed responsibility for a string of explosions in the capital last Friday and previous attacks on security officials.
Violence over the third-anniversary weekend of the 2011 uprising was among the worst in recent Egyptian history, with at least 70 people killed and hundreds injured.
Meanwhile, Mursi was in court in Cairo, charged with breaking out of prison. State television did not broadcast the event live, but later showed pictures of a defiant Mursi behind bars.
Outside the heavily-guarded court proceedings, security forces clashed sporadically with supporters of Mursi and the Muslim Brotherhood - although the capital was significantly calmer than it had been a few days earlier.
(Read more: Egypt's foreign minister: Invest, invest, invest!)
Economic recovery in jeopardy?
Egypt's economy, which depends largely on foreign investment, tourism and remittances from aboard, has been devastated by the ongoing political volatility in the country.
While tourism is likely to take another hit following the latest turmoil, Suez Canal operations and revenue - another key source of hard currency - have been unaffected.
Earlier this month, Finance Minister Ahmed Galal told CNBC in an exclusive interview that the country needed "all the stimulus it can get."
(Read more: Egypt needs 'all the stimulus it can get': Minister)
Aid pledges to the tune of $12 billion from the oil-rich Gulf countries have provided critical support for the government's stimulus packages and central bank's expansionary policies.
Despite the headwinds, Capital Economics argued in a research note late Monday the country's economy appeared to be making "a speedy recovery," citing improvements in the purchasing managers' index (PMI) data from private sector companies in November and December. Economic growth in the third quarter remained subdued, coming it at just 1 percent year-on-year.
Positive sentiment among traders appeared unaffected by the latest emerging market rattles, with year-to-date gains for the benchmark EGX 30 index standing at 8.63 percent.
— By CNBC's Yousef Gamal El-Din. Follow him on Twitter: @youseftv