GLOBAL MARKETS -Russian rouble slumps to 5-year low, yuan steady

    * European shares sag, Wall St starts near record high 
    * China's yuan steady after Tuesday's slide 
    * Rouble hits five-year low on Ukraine fallout 
    * Major currencies drift, gold near four-month peak 
    * Fed Chair Yellen to testify to Senate on Thursday 
 
    By Marc Jones 
    LONDON, Feb 26 (Reuters) - Worries grew on Wednesday that 
investors were backing away from some of the world's key 
emerging markets, as Russia's rouble hit a five-year low the day 
after China's yuan saw its biggest drop in three years. 
    The slide in the rouble came as tensions escalated in 
Ukraine, amid reports Vladimir Putin had ordered drills by his 
armed forces in western Russia, near the border with Ukraine. 
    The threat of debt default by Ukraine also rose. Russia 
holds $3 billion worth of Ukrainian debt issued last December, 
which could end up in default if certain terms are breached. 
   
    The rouble, at 36 to the dollar   , was at its lowest 
since early 2009 as U.S. trading picked up. Ukraine's hryvnia 
   hit a record low of 10 per dollar. 
    "Today's price action in the rouble is about Ukraine" said 
Rabobank emerging market economist Christian Lawrence. "Quite 
frankly, nobody knows what is going to happen there." 
    The market moves come at a time when some investors are 
already pulling money out of emerging markets and putting it 
back into better-understood developed economies. 
    Chinese shares and the yuan      stabilised after 
sharp falls on Tuesday, although dealers suspect the People's 
Bank of China was maintaining a gradual squeeze on the yuan 
  , to inject more two-way volatility into the market 
and wrong-foot speculators betting it would keep rising. 
    The government said on Wednesday in comments published on 
the State Administration of Foreign Exchange (SAFE) website the 
drop in the yuan was "due to an adjustment of trading strategy 
by main market participants." It added: "Fluctuations are normal 
compared to volatility in developed and emerging market 
currencies. Don't read too much into them." (www.safe.gov.cn) 
  <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
   Rouble performance vs dollar  http://link.reuters.com/myq58s 
   EM 2014 FX performance        http://link.reuters.com/jus35t 
   Ukraine Russia trade links    http://link.reuters.com/guc94v 
   Ukraine CDS                   http://link.reuters.com/wug43v 
  ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
     
    WALL STREET NEAR RECORD 
    Wall Street inched up, remaining around its record highs as 
money flowed back into developed markets.  
    A cautious tone was warranted before Federal Reserve Chair 
Janet Yellen testifies before the U.S. Senate on Thursday. She 
is likely to get questions on the recent spate of soft U.S. 
economic news and what it might mean for policy.     
    Europe's main share bourses in London   , Frankfurt 
   and Paris    were all staring a second straight 
day in the red. Falls in Swiss banks Credit Suisse    and 
UBS    added to the uncertain mood to the east. 
    Among major currencies, dealers reported scant activity 
ahead of the month's end and a slate of major global data next 
week. The dollar inched up on the yen to 102.34   , and made 
some headway against the euro, at $1.3690   . The euro has 
been corralled in a $1.3685-$1.3773 range for the past six 
sessions as traders debate whether the ECB will ease its policy 
next week. 
     
    GOLD GLITTERS    
    In Asia, MSCI's broadest index of Asia-Pacific shares 
outside Japan    had crept up 0.28 percent, with 
South Korea, Taiwan and the Philippines all fractionally firmer. 
Tokyo    ended down 0.2 percent, following a 1.4 percent 
gain on Tuesday. 
    Economic data from the United States on Tuesday had been too 
mixed to offer a lead. A closely watched housing survey showed 
home prices rose slightly more than expected but February 
consumer confidence fell short of expectations. 
    Yields on 10-year U.S. Treasury notes inched up to 2.715 
   percent in early U.S. trade after dipping 5 basis 
points overnight. 
    Both the record level on Wall Street and the drift lower in 
Treasuries came as soft U.S. data raised suspicions the Federal 
Reserve will be extra cautious as it looks to scale back its 
stimulus programme. 
    Gold, which has been one of the major winners from the 
recent wobble in Fed sentiment and emerging market uncertainty, 
pushed to a four-month top at $1,343.40 an ounce    before 
easing slightly to $1.332.00. 
    "At the moment, the market is reacting to weaker data from 
China and the U.S. on the assumption that if economic slowdown 
is confirmed, then there may be some scaling back of Fed 
tapering," Saxo Bank senior manager Ole Hansen said. "But it is 
not really a runaway. We are just grinding higher."  
 
 (Additional reporting by Clara Denina; Editing by Larry King) 
 ((marc.jones@thomsonreuters.com)(+44)(0)(207 542 9033)(Reuters 
Messaging: marc.jones.thomsonreuters.com@reuters.net)) 
  
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Keywords: MARKETS GLOBAL/