GLOBAL MARKETS-World stocks dip, Wall St flat; ruble at 5-yr low

Wed Feb 26, 2014 4:44pm EST

* European shares close lower as luxury goods makers slide
    * S&P 500 closes flat; retailers strong
    * China's yuan steady after Tuesday's slide, ruble hits
5-year low
    * Gold touches four-month peak
    * Fed Chair Yellen to testify to Senate on Thursday


    By Chuck Mikolajczak
    NEW YORK, Feb 26 (Reuters) - World stock markets dipped on
Wednesday, stung by growing worries over some emerging markets
as escalating tensions in Ukraine sent the Russian ruble to a
five-year low, while equities on Wall Street ended flat.
    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 saw gains fade in the latter portion of trading,
failing in its latest attempt to break its record closing high
of 1,848.38 set on Jan. 15. Data showing 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, but was not
enough to lift the benchmark S&P index over what has proven to
be a strong resistance level. 
    "It just seems like there's an absence of buyers once we hit
this area. There's no firm commitment to drive the S&P back
above this particular level," said Todd Salamone, Senior Vice
President of Research at Schaeffer's Investment Research in
Cincinnati, Ohio. 
    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 United States warned Russia it would be a "grave
mistake" to embark on a military intervention in Ukraine and
said Washington was considering $1 billion in U.S. loan
guarantees for Kiev. 
    The ruble was at 36.025 to the dollar, after touching
its lowest level since March 2009. 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 were a bright spot for a second
straight session, with the S&P retail index up 1.4
percent. 
    Shares of Lowe's Cos Inc, the No. 2 U.S. home
improvement retailer, rose 5.4 percent to $50.72 after the
company reported strong growth in quarterly sales, showing that
it was narrowing the gap with market leader Home Depot Inc
. 
    Target Corp shares climbed to an almost six-week
high after the company reassured investors that customers were
beginning to return to its U.S. stores, suggesting that the
lingering impact of a data breach that affected millions of
shoppers may not be as bad as some had feared. Shares of Target
jumped 7 percent to $60.49. 
    The Dow Jones industrial average rose 18.75 points or
0.12 percent, to 16,198.41, the S&P 500 gained 0.04
points to stay virtually flat, to 1,845.16 and the Nasdaq
Composite added 4.477 points or 0.1 percent, to
4,292.064.
    Gains on Wall Street were held in check 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. 
    "We have a new Fed Chair on Capitol Hill tomorrow, and
there's just that hesitancy to push stocks up into these new
highs," said Salamone.   
    The MSCI world equity index, which tracks
shares in 45 nations, fell 0.9 point or 0.22 percent, to 407.44.
    The pan-European FTSEurofirst 300 closed down 0.2
percent at 1,348.75 points, weighed down by declines in luxury
goods makers. 
    Shares of LVMH finished down 1.6 percent, Kering
 fell 2.2 percent, and Hermes was down 0.2
percent. The weakness was attributed to a 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 0.7
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. 
    The dollar index rose 0.3 percent to 80.503 after
hitting a high of 80.524, it strongest level since February 13.
    The euro fell against the dollar, down 0.44
percent at $1.3684. Against the yen, the dollar was up 0.14
percent at 102.36.
    U.S. Treasuries, the benchmark for global borrowing costs,
rose 10/32 in price on the benchmark 10-year note to
yield 2.665 percent. 
    Gold retreated after earlier on Wednesday hitting four-month
highs as the dollar advanced and the new home sales data dented
bullion's safe-haven appeal. Spot gold earlier touched
its highest level since Oct. 30, at $1,345.35 an ounce before
falling 0.9 percent while U.S. COMEX gold futures for
April delivery settled down $14.70 at $1,328 an ounce. 
 
    Brent crude rose 1 cent to settle at $109.52 a
barrel and U.S. oil settled up 76 cents at $102.59, after
government data showed a surprisingly small build in crude
inventories and another large drawdown at the American
benchmark's delivery point.
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