LONDON: European and US equities were mostly higher on Monday as investors seized on hopes of progress in peace talks between Russia and Ukraine, while oil prices slumped on news of a Covid lockdown in China's tech hub Shenzhen.

Europe shrugged off earlier losses in Asia after Moscow said it made headway in peace talks with Kyiv ahead of the latest round on Monday.

Frankfurt shares ended the day 2.2 percent higher, and Paris added 1.8 percent while London gained 0.6 percent.

On the other side of the Atlantic, sentiment on Wall Street was more muted as traders reckoned with the prospect of an increase in interest rates by the Federal Reserve later this week.

The S&P 500 was flat and the Dow Jones Industrial Average rose by 0.7 percent, while the Nasdaq lost 1.2 percent.

The prospect of easing supply tensions and growing demand fears also sent oil prices sliding.

"Moscow claims substantial progress in peace talks while escalating conflict... but that is enough for traders grabbing onto any good headline," said Markets.com analyst, Neil Wilson.

The latest talks come more than two weeks after Russia's President Vladimir Putin ordered his army to invade pro-Western Ukraine.

Back in Asia, investors worried that China's spreading coronavirus lockdowns could throttle the Asian superpower's demand for crude.

Stock prices in Hong Kong, in particular, took a pounding as the Shenzhen lockdown fuelled a tech-sector rout.

"The rapid spread of Covid across China is now unsettling investors, with expectations that mass lockdowns will once again blight the economy," said Hargreaves Lansdown analyst, Susannah Streeter.

Oil demand was "expected to take a hit if Chinese economic output falls", she said.

Crude has continued to slide after rising to close to $140 per barrel last week, a near 14-year high.

However, the price of oil -- which keeps the wheels of the global economy turning -- remains elevated, at the same time feeding upward pressure on inflation.

The Fed's latest monetary policy gathering is expected to end Wednesday with a quarter-point interest rate hike to tackle decades-high inflation in the US.

The US central bank is having to tread a fine line between reining in runaway inflation while also supporting the world's biggest economy in the face of the war in Ukraine, which many fear could lead to another recession.