GLOBAL MARKETS-World stocks flat, but Wall St rises; ruble at 5-year low

* European shares sag, Wall St starts near record high

* China's yuan steady after Tuesday's slide

* Ruble hits five-year low on Ukraine fallout

* Gold near four-month peak

* Fed Chair Yellen to testify to Senate on Thursday

By Chuck Mikolajczak

NEW YORK (Frankfurt: HX6.F - news) , Feb 26 (Reuters) - World stocks markets were flat

on Wednesday as worries about some emerging markets grew as the

Russian ruble hit a five-year low as tensions escalated in

Ukraine, while equities on Wall Street rose.

The drop in the ruble came a day after China's yuan had its

biggest drop in three years, which weighed on shares of European

luxury goods makers because of their heavy exposure to emerging

markets.

The S&P 500 was on track to break its record closing high of

1,848.38 set on Jan. 15, as data showing that sales of new U.S.

single-family homes surged to a 5-1/2-year high in January eased

concerns about a slowing of economic momentum.

"The vast majority of recent weakness has been related to

weather, with the Northeast paralyzed and stores horrible as a

result, while we continue to see strength in areas that weren't

impacted," said Eric Green, senior portfolio manager and

director of research at Penn Capital Management in Philadelphia.

The ruble slid as tensions escalated in Ukraine, after

Russian President Vladimir Putin ordered drills by his armed

forces to test combat readiness in western Russia, near the

border with Ukraine.

The threat of debt default by Ukraine also increased. Russia

holds $3 billion worth of Ukrainian debt issued last December,

which could end up in default if certain terms are breached.

Ukraine has asked the International Monetary Fund to help

prepare a new financial aid program, while the country's central

bank chairman said the new government would soon have its own

anti-crisis program ready.

The ruble, at 36 to the dollar, was at its lowest

level since March 2009 as U.S. trading picked up. Ukraine's

hryvnia hit a record low of 10 per dollar.

The market moves come as some investors have already been

pulling money out of emerging markets and putting it back into

better-understood developed economies.

Chinese shares and the yuan stabilized 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 country's foreign exchange regulator said a dip in the

yuan is normal as some investors unwind their long bets on the

currency, helping inject two-way exchange rate volatility over

time.

On Wall Street, retailers contributed to gains for a second

straight session, with the S&P retail index up 2.7

percent.

Shares of Lowe's Cos Inc, the No. 2 U.S. home

improvement retailer, jumped 5.7 percent to $50.84 after the

company reported strong growth in quarterly sales, showing that

it was narrowing the gap with market leader Home Depot Inc

.

Shares of Target Corp (NYSE: TGT - news) jumped 7 percent to $60.48

after its quarterly results.

The Dow Jones industrial average rose 29.62 points or

0.18 percent, to 16,209.28, the S&P 500 gained 4.34

points, or 0.24 percent, to 1,849.46, and the Nasdaq Composite

added 21.93 points, or 0.51 percent, to 4,309.517.

Gains on Wall Street were curbed ahead of testimony by

Federal Reserve Chair Janet Yellen 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.

The MSCI world equity index, which tracks

shares in 45 nations, fell 0.44 points or 0.11 percent, to

407.9.

The pan-European FTSEurofirst 300 index was off 0.1 percent

at 1,350.15 points.

Shares in luxury goods makers were among the top losers,

with LVMH (TLO: LVMH.TI - news) down 1.7 percent, Kering (Other OTC: PPRUF - news) down 2

percent and Hermes down 0.8 percent. Traders pointed

to a downbeat note from Credit Suisse (NYSE: CS - news) analysts who downgraded

the sector to "benchmark" from "overweight" citing the sector's

big exposure to China and other emerging markets.

Credit Suisse was also in the spotlight, down 2.8

percent as a U.S. Senate subcommittee alleged new misdeeds by

the Swiss lender.

The dollar rose to its highest level in two weeks against a

basket of major currencies as investors sought safety on the

geopolitical tensions in Russia and Ukraine.

In late morning trading, the dollar index rose 0.39

percent to 80.457. It hit a high of 80.490, it strongest level

since mid February.

The dollar also rose against the euro, which was down

0.54 percent at $1.3672 after hitting a two week-trough of

$1.3584.

Against the yen, the dollar was up 0.09 percent at 102.30

.

Yields on 10-year U.S. Treasury notes inched down to 2.698

percent.

Gold retreated from earlier four-month highs on Wednesday as

the dollar firmed, but was still seen benefiting from

uncertainty over China's economic policies and worries about the

U.S. recovery in the short term. Spot gold touched its

highest since Oct. 30 at $1,345.35 an ounce, before falling 1.1

percent at $1,325.10.