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

NEW YORK, 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 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 down 1.7 percent, Kering down 2 percent and Hermes down 0.8 percent. Traders pointed to a downbeat note from Credit Suisse 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.