* China inflation intensifies broad selloff
* Russian shares, rouble fall sharply on dimming oil outlook
* Turkish, Hungarian risk premiums up, currencies fall
By Sebastian Tong
LONDON, Aug 9 Emerging assets tumbled on Tuesday to their weakest in over a year as China's higher-than-expected inflation reading intensified a global sell-off fuelled by the weekend's unprecedented U.S. credit rating downgrade.
Risk premiums for Turkey and Hungary spiked higher in tandem with sharp currency losses while Russia's rouble fell over 3 percent as investors braced for a drop in oil demand.
Investors remain risk-averse despite a growing belief that the Federal Reserve will signal some form of continued monetary stimulus to stem a financial market meltdown at its policy meeting later in the day.
The European Central Bank's bond-buying helped to curb rising Italian and Spanish government borrowing costs but failed to dispel fears over euro zone sovereign debt given anaemic growth in the single currency area.
"Expectations of lower growth in developed markets has hit emerging markets very hard. The most cyclical markets have been impacted the most and this has happened regardless of valuations," said John-Paul Smith, head of emerging equity strategy at Deutsche Bank in London.
By 1005 GMT, emerging shares had tumbled 3.5 percent, down for their sixth straight session but chalking up narrower losses than Monday when it fell five percent during the session to mark its biggest one-day fall in over two years.
Emerging sovereign debt widened 3 basis points to trade at 332 bps over U.S. Treasuries, their weakest levels since June 2010.
Stronger-than-forecast inflation in China provided another knock to sentiment. With price pressures still high, Beijing is unlikely to embark on a stimulus package akin to 2008's, which helped shore up global demand.
"The assumption that emerging markets are going to come to the rescue is not right," Smith said.
The prospect of weaker Chinese demand for raw materials sent Russian shares reeling down 7 percent to their lowest in over 10 months while the rouble sank to eight-month lows versus its dollar/euro basket , on track for its biggest one-day fall on record.
Against the dollar, the rouble plumbed six-month depths while its fellow commodity-linked currency, South Africa's rand , sank to 13-month lows.
South Africa's stock market was closed for a holiday.
Emerging European shares saw the heaviest losses with Czech shares stumbling more than 5 percent to their weakest in over two years and Romanian stocks plunging 7 percent to October 2009 levels.
Polish stocks retreated for the seventh straight session to 13-month lows while Hungary, where worries are growing about its foreign-currency debt burden, saw its shares drop nearly 5 percent.
The Polish zloty slipped 0.8 percent to its weakest against the euro in five months while the Hungarian forint traded at its weakest since mid-January.
Turkish shares sank to their lowest levels in 1-1/2 years. Turkey is seen as particularly vulnerable to a global capital retrenchment because of its huge current account deficit, which is seen exacerbated after the central bank defied market expectations last week by cutting its policy rate.
On Monday, Turkish Central Bank Governor Erdem Basci told Reuters the bank could consider rate cuts as an option if downside risks further threaten economic growth.
The lira was flat after reaching a near 2-1/2 year low against the dollar .
"If the lira continues to slide, another rate cut would be very risky, and we would expect any measures taken over coming weeks to be focused on shielding lira from a much deeper correction, either via further lira-liquidity injections or higher daily dollar sales," said RBC Markets in a note.
The cost of insuring Turkish sovereign debt for five years hit near two-year highs while Hungarian and Russian five-year credit default swaps reached 28-month and 14-month peaks respectively. (Additional reporting by Sujata Rao and Carolyn Cohn; Editing by Catherine Evans)