Morning Chronicle - World stock markets rally as Ukraine peace talks resume

Sentiment was boosted as face-to-face discussions began in Istanbul to try and end the nearly five-week-old war which has killed an estimated 20,000 people.

Shanghai stocks however fell one day after China's biggest city and financial hub of 25 million people was placed back in lockdown.

But oil prices rebounded slightly after tanking Monday on Chinese energy demand fears due to the new Covid-19 curbs and rising infections.

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

- Hopes of 'tangible progress' -

Stocks climbed "on hopes the latest round of peace talks between Moscow and Kyiv might yield tangible progress", said AJ Bell investment director Russ Mould.

"Suggestions the Russian side are softening some of their previous demands raised spirits, but the market is unlikely to take anything for granted."

While the conflict in eastern Europe continues to rage, traders have grown increasingly confident about shifting back into stocks as diplomats work to find a peaceful solution.

Wall Street had also posted healthy gains Monday.

"A lot of negative news is already reflected in market pricing and investor positioning, and we still see upside in US equities for the rest of 2022," Solita Marcelli at UBS Global Wealth Management said.

And market strategist Louis Navellier added that "growth forecasts of both overall earnings and GDP remain positive for the next several quarters on the strength of the post-pandemic reopening".

Still, uncertainty remains rife on trading floors as soaring inflation ramps up expectations that the 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 Tuesday after the Bank of Japan said it will 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 1145 GMT -

London - FTSE 100: UP 1.3 percent at 7,570.24 points

Frankfurt - DAX: UP 2.0 percent at 14,711.81

Paris - CAC 40: UP 2.6 percent at 6,760.97

EURO STOXX 50: UP 2.5 percent at 3,982.71

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)

New York - DOW: UP 0.3 percent at 34,955.89 (close)

Euro/dollar: UP at $1.1055 from $1.0985 late Monday

Pound/dollar: UP at $1.3100 from $1.3088

Euro/pound: UP at 84.37 pence from 83.93 pence

Dollar/yen: DOWN at 123.46 yen from 123.86 yen

West Texas Intermediate: UP 0.7 percent at $106.73 per barrel

Brent North Sea crude: UP 1.2 percent at $113.80

A.White--MC-UK