sounds like poss turbo prob but might be head gasket prob sound like its running on its own oil black smoke on diesels is either over fueling or oil getting in
poss on turbo diesel if not driven hard will kick out black smog
when reved hard ie first rev on mot smoke test
did car accerate when noise came
if ya going to keep the car for next couple of years,go to a specialist turbo shop and get a tuned turbo unit as puegeot or any retailer only supply turbos that give you 50 per cent power,they supply these units because there made to puegeot spec,which they down tune to make the car more economical,also if your turbo unit has blown a seal it would produce black smoke
It sounds if its overfueling itself.
Have you checked the obvious such as the air filter. Are the hoses between the filter housing and turbo in good order, such as 'no signs of the hoses clasping when the turbo comes in for extra air' or no blockages at the intake to the filter assembly.
Otherwise there maybe a fault on the overfueling device in the injector pump connected with the turbo boost pressure.
Don't think its the turbo, because you are having black smoke from too much fuel (where there seems to be boost pressure to trigger the overfuel device) causing the knock, if was blue then it maybe the turbo seals that have blown using engine oil.
Advise you take it to a local OFFICAL diesel pump repair company, and not to a local or dealer garage or you will charged extra for them to sub-contract it to the diesel pump company.
pug 406 turbo diesel problems -
Robin the Technician
Before you go tto any expense, first check the intercooler pipe for a split. The pipe runs down the front centre of the engine and curves off to the right (as you look at it). I had identical symptoms with mine a month or two ago and it turned out this pipe was split. The car would tick over without problems but the minute you put your foot down whilst driving it would struggle and lose power. I seem to remember the pipe was about £35 ish, but its worth checking out. If its split it will cause an imbalance to the air entering the engine.
Hope this helps...
These are the views of Robin the Technician with 35 years in the trade. I fix, therefore I am...