* 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) 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."