GLOBAL MARKETS-Yuan drops most in 3 years, Wall Street near all-time high

* Yuan sees biggest drop in almost three years after PBOC moves

* Contrasts with world stocks at 6-year high; Wall St opens at peak

* Gold holds recent gains, major currencies rangebound

By Marc Jones

LONDON, Feb 25 (Reuters) - The repatriation of investors' cash into developed markets was underscored on Tuesday as Wall Street opened at an all-time high after China's yuan suffered its worst day in over three years.

Wall Street .SPX .DJI started steadily after Monday's record high as confidence in the United States and Europe helped cool markets after the yuan's plunge and a sharp drop in Beijing and a number of other emerging market bourses .SSEC .

Uncertainty over China is stoking worries about a faster-than-projected slowdown in its massive economy and is dovetailing with political worries in other big emerging markets like Ukraine, Thailand, Nigeria and Turkey.

The U.S. Federal Reserve has also started to scale back its huge stimulus.

It's a potent mix that has seen a hefty $38 billion pulled out of emerging markets over the last 17 weeks and $44.2 billion stuffed into developed market equity funds since the start of the year. News Search ID:nL6N0LQ13X

The moves have been reinforced by Wall Street's recent run and Ramin Nakisa, a global macro strategist at UBS, said the contrast with sliding emerging markets underscored their limited appeal in the current difficult environment.

"We think there will be further flows into the U.S. as the Fed cuts back on its stimulus," he said. "If you could earn 3-3.5 percent on U.S. Treasuries for example would you risk money in volatile emerging market debt for a small premium."

The yuan CNY=CFXS has entered a dramatic weakening cycle in recent weeks, guided by a series of moves by the central bank aimed at instilling caution into those who for years have been betting on its rise versus other major currencies.

Tuesday saw a significant acceleration in the move. The yuan's sharpest drop since November 2010 extended its fall in the past week to just over 1 percent, amid talk the People's Bank of China (PBOC) had been discreetly intervening in the spot market. News Search ID:nL3N0LT2HI

China allows the yuan to move 1 percent above or below a midpoint set daily but experts believe the recent depreciation is intended to set the stage for a widening of that band to 2 percent or more this year to make it more free moving.

"A lot of people were assuming the yuan would continue to strengthen... so what has happened over the last week has left a lot of people blindsided," said UBS's Nakisa. "We expect to see more volatility in emerging markets in the rest of the year."

CRUISING AT ALTITUDE

MSCI's all world index .MIWD00000PUS , which tracks stocks in 45 countries, was in positive territory for the 13th session in 15 as it sat at a six-year high.

In Europe, the urge to take profits after seven straight sessions of gains was strong and the pan-regional FTSEurofirst 300 .FTEU3 sagged 0.4 percent, led by a 1 percent drop from London's FTSE .FTSE due to its prevalence of China-influenced mining firms Href="NewsSearch">.EU .

The euro EUR= and benchmark German government bonds

DE10YT=TWEB kept to tight recent ranges and there was little impact from new European Commission forecasts which slightly increased its growth estimate for the euro zone to 1.2 percent in 2014, with a further 1.8 percent expansion next year.

Inflation was seen at 1 percent this year and 1.3 percent in 2015, still well short of the European Central Bank's target of just below 2 percent. The ECB meets early next month and will be armed with its own in-house forecasts.

Goldman Sachs pushed back on Tuesday its prediction of a rate cut until April, although it didn't rule out a move by the ECB to keep money market liquidity topped up by ending its weekly 'sterilisation' of past government bond purchases.

"It will be a big step for the ECB but a small step for mankind," said Neil Williams, chief economist at fund manager Hermes.

WALL STREET HIGH

Away from China, Japan's Nikkei .N225 bolted ahead by 1.4 percent to breach the 15,000 barrier, which in turn gave the dollar a slight lift on the yen, although it later sagged. JPY=

It had followed in the footsteps of Wall Street, where the benchmark S&P 500 hit an intra-day record on Monday as the Nasdaq punched to peaks last seen almost 14 years ago.

Another data deluge is due, including confidence readings, housing market surveys and retail sales figures ECONG7 , while stocks are likely to remain on alert after Monday's fresh flurry of merger and acquisition activity.

U.S. Treasuries prices, which provide the benchmark for global borrowing costs, were steady after a dip overnight, with yields on the benchmark 10-year note US10YT=RR holding just below 2.74 percent in early U.S. trade.

The swinging risk sentiment continued to buffet emerging markets. The latest twist in a government corruption scandal in Turkey saw the lira hit two-week lows versus the dollar and stocks fell 3 percent. Href="NewsSearch">EMRG/FRX

Ukraine fared better, with its sovereign dollar bonds keeping most of Monday's stellar gains as hopes grew it would receive Western aid to prevent a debt default after the ousting of president Viktor Yanukovich. News Search ID:nL6N0LT410 Href="NewsSearch">EMRG/FRX

Gold XAU= , which has benefited from recent global uncertainty, was also firm at around $1,333 an ounce after touching a four-month high. It faces stiff resistance at October's peak of $1,361.60.

Copper fell for a second day on concern about the impact of slower growth in China while oil prices faded just a little to leave Brent crude LCOc1 at $110.30 a barrel and U.S. oil at $101.24 a barrel. Href="NewsSearch">O/R Href="NewsSearch">MET/L

(Additional reporting by Wayne Cole in Sydney; Editing by Catherine Evans, John Stonestreet)

((marc.jones@thomsonreuters.com)(+44)(0)(207 542 9033)(Reuters Messaging: marc.jones.thomsonreuters.com@reuters.net))

 
((To read Reuters Global Investing Blog click on  
http://blogs.reuters.com/globalinvesting;  
for the Macro Scope Blog click on  
http://blogs.reuters.com/macroscope;  
for Hedge Fund Blog Hub  
click on http://blogs.reuters.com/hedgehub) 
((For the state of play of Asian stock markets please click on:   ))

Keywords: MARKETS GLOBAL/