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Oil sinks on China demand fears; US stocks boosted by Ukraine talks

NEW YORK: World oil prices dived Monday on worries about China’s energy demand amid the latest Covid-19 surge, while Wall Street stocks rallied on hopes over Ukraine peace talks.

US benchmark West Texas Intermediate oil and Europe’s London Brent crude both slumped by more than six percent in value.Millions of people in China’s financial hub were confined to their homes as the eastern half of Shanghai went into lockdown to curb the country’s biggest ongoing Covid-19 outbreak.

Authorities are imposing a two-phase lockdown of the city of about 25 million people to carry out mass testing.

Robbie Fraser, analyst at Schneider Electric, called the hit to Chinese demand a “significant” risk for oil markets, which are already grappling with high crude prices.

The pullback in oil prices broadly supported global equity markets, which have seen waves of selling this year due to concerns about inflation.

Wall Street enjoyed another solid session, with the tech-rich Nasdaq Composite Index adding 1.3 percent.

Ukraine’s President Volodymyr Zelensky said Kyiv’s negotiators were studying a Russian demand for Ukrainian neutrality. The comments came ahead of new face-to-face talks between the two countries, set to start Tuesday in Turkey.

“Markets have taken some stout headwinds in stride, as investors continue to grapple with the ultimate impact of the war in Ukraine and the uncertainty regarding how aggressive the Fed will be to try to tamp down persisting inflation pressures,” Charles Schwab investment bank said in a note.

In foreign exchange markets, meanwhile, the Japanese yen fell to its lowest level since 2015 as the Bank of Japan announced plans for fresh purchases of 10-year government bonds.

The move comes as the Federal Reserve and other central banks tighten monetary policy.

“Japan’s move to hold down yields to support the world’s (number) 3 economy stands in stark contrast to the Fed, which has hinted at bigger rate increases to control inflation,” said Joe Manimbo, analyst at Western Union Business Solutions.

Among individual companies, Tesla jumped 8.0 percent as the electric car maker announced plans for a stock split.

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