Two goals apiece from Raheem Sterling and Taiwo Awoniyi saw the two bottom-half sides cancel each other out in West London.
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Conor Gallagher had given the visitors an early lead, but Matias Vina’s excellent strike meant the game was level for much of the afternoon.
Los Blancos entered Tuesday’s quarter-final second leg with a strong advantage, having recorded a 2-0 win when the two teams locked horns at Bernabeu in the reverse fixture last week.
Christopher Nkunku is set to join the Blues this summer from RB Leipzig, but the club are believed to be planning to move for a big-money centre-forward at the end of the campaign.
The 27-year-old was not included in the matchday squad for the last 16 victory over Senegal due to a family matter.
Earlier this week, a video of a phone call between Koulibaly and former incumbent John Terry went viral, the latter’s legendary shirt having remained vacant since his departure.
Following the signings of Julian Alvarez and Erling Braut Haaland, Sterling has been linked with a move away from City due to a concern over playing time.
The 27-year-old enjoyed a prolific spell in front of goal over the festive period, netting five times and providing one assist in five games for Pep Guardiola’s side.
Raheem Sterling’s close-range header in the fourth minute was followed by two brilliant strikes either side of half time from in-form playmaker Bernardo Silva, which helped the Citizens claim their 11th win of the campaign.
In a fast-paced and entertaining clash, Phil Foden’s early first half opener had been cancelled by a John Stones own goal with the Belgian side proving dangerous opponents.
England players, Raheem Sterling and Jude Bellingham, were targeted by monkey chants by home supporters during the game in Budapest, which England won 4-0.
Harry Kane’s 104th-minute penalty was initially saved by Danish gloveman Kasper Schmeichel, but the England captain made no mistake with the rebound to send the majority of the 60,000 fans in attendance into raptures.
Having kicked off Group D by beating World Cup semi-final foes Croatia and then been booed off following the goalless draw with rivals Scotland, Gareth Southgate’s already-qualified side put in a controlled display on Tuesday
Sterling broke through the middle of the Croatian defence and ran onto the end of a pass from Kalvin Phillips to fire home his 57th minute marker and get England off to a winning start in Group D.
After a frustrating first 45 minutes in south London, it was City’s record goalscorer who broke the deadlock with a superb finish and Ferran Torres wrapped up the points soon after following a fine curled effort.
The victory saw City restore their 10-point advantage over Leicester City following the Foxes’ win at Aston Villa earlier in the day, while Mikel Arteta’s Gunners remain rooted in 10th place, 11 points off the top four.
Kyle Walker, Raheem Sterling and Gabriel Jesus were on target to help Pep Guardiola’s side to a 15th consecutive victory before Morgan Whittaker grabbed a Swansea consolation 13 minutes from time.
Pep Guardiola’s men hit West Bromwich Albion for five to return to the top of the table, and they remained on their perch after the Blades marched to a shock 2-1 victory over Manchester United.
After a spell of constant pressure, City broke the deadlock in the 16th minute when playmaker Kevin De Bruyne’s cross from the right wing found Sterling, who slotted the ball past Saints goalkeeper Alex McCarthy.
Pep Guardiola’s side, who thrashed Burnley 5-0 last week, could easily have won by a bigger scoreline on a comfortable afternoon at the Etihad Stadium.