* Wall Street starts lower * Euro at two-month low after inflation data, bonds rally * European shares sag, commodities lower * Chinese New Year holiday closures curb activity * Dollar regains grip on gains on resurgent yen By Marc Jones LONDON, Jan 31 (Reuters) - World shares tumbled towards their worst month in almost two years on Friday as turbulence engulfed emerging markets. European and U.S. markets were unable to fight the flow with Europe's main stock indexes suffering another torrid day and Wall Street opening down 1 percent on course for a second successive week of falls. U.S. Economic sentiment data was due later after a flurry of employment benefits and inflation figures, but it was the resumption of intense selling of vulnerable emerging markets that remained the focus. The Russian rouble and the Turkish lira came under renewed pressure in the currency markets, while government borrowing costs jumped across the board despite local policymakers' efforts to staunch the bleeding. Signs also grew that the stresses were increasingly spreading to central European countries such as Poland and Hungary, which have fared relatively well in the first phase of the sell-off. Poland delayed publication of its monthly debt supply plan until next week due to market turbulence and an overhaul of its pension scheme, a day after Hungary scrapped a bond sale. "We are in a negative feedback loop of weak currencies, higher interest rates, weak growth and capital outflows," said David Hauner, head of EEMEA fixed income strategy and economics at Bank of America Merrill Lynch. "This feedback loop needs to play out and that means at the end of the day EM assets need to become much cheaper. Only then will people come back to buy." EURO LOW Euro zone consumer price inflation dropped in January, bucking market expectations and putting the euro in the firing line. Having threatened to do so all morning, it broke to a two-month low against the dollar of $1.3507 as U.S. trading gathered pace, having started the week at $1.37. Eurostat's first reading of January inflation showed it slowed back down to 0.7 percent, the level that saw the ECB, which meets next Thursday, catch markets off guard with a rate cut in November. Unemployment remained at a record high. "It's now more likely than ever that Draghi is going to have to step in with some extraordinary measure to stave off deflation," said Aberdeen Asset Management fixed income investment analyst Luke Bartholomew. "The big challenge is exactly what to do. With the store cupboard of conventional measures largely bare, any policy action is likely to be unprecedented." Although it is more likely to wait until March when it has new in-house forecasts available, the most obvious option available to European Central Bank President Mario Draghi and his fellow policymakers is to take rates even closer to zero, and in the case of the deposit rate that acts as floor for money rates, into negative territory. But they could just as easily increase the amount of cash sloshing around the system by no longer "sterlising" the 170 billion euros of Italian, Spanish and other bonds bought at the peak of the euro crisis. SHARED PAIN The prospect of more ECB easing pushed down euro money market rates and buoyed demand for euro zone government bonds which become more attractive the lower borrowing costs go. For the region's shares, however, it was only pain. Britain's FTSE 100 and France's CAC 40 were down 1.5 and 1.6 percent respectively, while Germany's DAX was nursing falls of 2 percent as weaker than expected retail sales and pressure on Deutsche Bank added extra gloom. For MSCI's 45-country, all-world index it was its biggest monthly drop in almost two years having seen more than a trillion dollars wiped off its value this week. The sell-off has been fed by emerging markets where political factors in countries such as Turkey, South Africa and Argentina have amplified worries about global economic imbalances and the end of cheap global central bank money. Data from Boston-based fund tracker EPFR Global showed investors yanked $9 billion from emerging stock and bond funds this week, with equities seeing their biggest outflow in 2-1/2 years. The grab for safer assets meant the dollar had the upper hand in the currency market while on the commodities front, spot gold edged up $1,250 an ounce, though it was set to snap a 5-week run of weekly gains. Brent oil and U.S. crude dipped to $106.78 and $97.43 a barrel respectively while growth-attuned metal copper drifted toward a 4 percent monthly fall. "The absence of the Chinese market for the next week means that we may see some further downside on commodities, especially if we do see the dollar gaining ground," said Tim Radford, of Sydney-based metals adviser Rivkin. The market is closed for the Chinese New Year holiday.