Portugal Colonial - Oil prices sink, stocks surge on Ukraine hopes after talks

Oil prices fell by more than five percent, with New York's WTI contract dipping under $100 per barrel as traders eyed easing Russian oil supply fears amid face-to-face talks in Istanbul aimed at resolving the nearly five-week-old war.

Russia said it would scale down fighting around two Ukrainian cities following the talks with Ukraine and raised the possibility of a meeting between the Russian and Ukrainian presidents.

Oil prices sprinted to multi-year peaks soon after the invasion which began on February 24 over worries about lost supply from major producer Russia.

In response to the invasion, the West has imposed crushing economic sanctions.

"The fact that Russia is going to scale back its military presence near Kyiv is excellent news, and hence we see traders backing riskier assets," AvaTrade analyst Naeem Aslam said.

"As for the oil price, it has plunged and trading sharply lower because if the conflict comes to an end, we are likely to see fewer issues with Russian energy," Aslam said in note to clients.

"Yes, it will not be that easy to roll back those sanctions, and traders are aware of that fact; however, there will be no further sanctions, and this is a good sign in terms of oil supply."

Europe's major stock markets closed higher.

Paris closed 3.1 percent up, with shares in the luxury sector leading the way, while Frankfurt was 2.8 percent higher and London gained 0.9 percent.

Wall Street was also slightly higher in mid-morning deals.

The Russian ruble, which plummeted after the invasion, soared by 10 percent against the dollar.

"It is the first time in this conflict where we have seen any indications for any form of easing of military action from the Russian side," SEB analyst Bjarne Schieldrop told AFP.

"Until this point the Russian stand has been very firm of its goals," Schieldrop said.

"Now for the first time the market is hoping that there might actually be a way forward not being a full destruction and takeover of Ukraine."

- Lockdown to soaring inflation -

Asian stock markets had earlier mostly rallied even before the statements from Istanbul, on investor optimism of progress.

However, Shanghai bucked the trend, with stocks falling a day after China's biggest city and financial hub of 25 million people was placed back in lockdown.

Oil prices had fallen on Monday on concerns that the lockdown would affect demand from China, the world's top crude consumer.

And the yen firmed versus the dollar, after tumbling the previous day to a 2015 low on loose Japanese monetary policy.

Soaring inflation remains a concern for investors as it raises expectations that the US Federal Reserve will act increasingly more aggressive in tightening monetary policy.

That has sent Treasury yields rocketing, fuelling fears of a sharp economic slowdown.

The yen had slumped after the Bank of Japan said it would buy 10-year government bonds to keep yields from running above its target.

The move reinforced the divergence between the BoJ and Fed as US officials battle to rein in inflation.

- Key figures around 1600 GMT -

West Texas Intermediate: DOWN 3.2 percent at $102.54 per barrel

Brent North Sea crude: DOWN 3.0 percent at $106.20

New York - DOW: UP 0.7 percent at 35,194.89 points

London - FTSE 100: UP 0.9 percent at 7,537.25 points (close)

Frankfurt - DAX: UP 2.8 percent at 14,820.33 (close)

Paris - CAC 40: UP 3.1 percent at 6,792.16 (close)

EURO STOXX 50: UP 2.96 percent at 4,002.18

Tokyo - Nikkei 225: UP 1.1 percent at 28,252.42 (close)

Hong Kong - Hang Seng Index: UP 1.1 percent at 21,927.63 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,203.94 (close)

Euro/dollar: UP at $1.1097 from $1.0985 late Monday

Pound/dollar: UP at $1.3128 from $1.3088

Euro/pound: UP at 84.55 pence from 83.93 pence

Dollar/yen: DOWN at 122.66 yen from 123.86 yen

A.S.Diogo--PC