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EMERGING MARKETS-Trump turmoil sends emerging markets into tailspin

LONDON, May 18 (Reuters) - Rising uncertainty over U.S. President Donald Trump's future slammed emerging markets on Thursday, with equities down almost 1 percent and Brazilian assets taking an additional hit from an escalation in local political risk.

MSCI's emerging market equity benchmark fell for a second straight day and Russian dollar-denominated stocks chalked up some of the biggest losses with a drop of 1.6 percent.

Developing stocks took their cue from Wall Street, where the Dow and S&P 500 both tumbled 1.8 percent overnight following reports that Trump tried to interfere with a federal investigation, throwing doubt over his pro-growth policies and raising the possibility he may be forced to quit the presidency.

An exclusive Reuters report detailing interactions between major players in Trump's campaign and Russian officials is continuing to roil markets. nL2N1IJ0UK 3/8

Emerging currencies got a drubbing, with South Africa's rand , Turkey's lira and Mexico's peso all also weakening for a second straight session, slipping as much as 2 percent against the dollar. Yields on local benchmark bonds in Turkey and South Africa hit the highest since the end of April.

"We are seeing a classic rise in global uncertainty with risk assets being out of favour and positions being closed on some of the most risky emerging markets such as Turkey and South Africa," Credit Agricole's head of emerging market strategy Sebastian Barbe said.

"We have been advising clients to be a bit cautious, even before the Trump issues, because volatility was low, good news had been priced in and protectionist fears had already receded."

The rouble weakened nearly 1 percent in its third straight session of losses as falling oil prices also weighed.

Meanwhile, a Brazilian media report implicated President Michel Temer in a corruption scandal that could derail investors' huge appetite for the country's assets.

Newspaper O Globo reported that Temer gave his blessing to an attempt to pay a potential witness to remain silent in the country's biggest-ever graft investigation, according to plea-bargain testimony from a powerful businessman.

"This is not just the usual political noise that's spreading to markets, it can impact the ability of the government to finalise reforms which are necessary for appetite of investors to continue," Barbe said.

The London-listed iShares MSCI Brazil tumbled more than 12 percent, though the real remained unchanged against the dollar.

Emerging equities have risen 15 percent so far this year and emerging bond returns are among the best in the world but AllianzGlobal Investors' head of emerging debt, Greg Saichin, said this appeared in peril.

"We have had 21 weeks of inflows into the asset class turning it into a more crowded trade," Saichin said. "If there would be a pain event of any sort you have enough flows that could reverse this happy state of affairs."

For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see) Emerging Markets Prices from Reuters

Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley

Emrg Mkt Indx 998.21 -10.42 -1.03 +15.77 Czech Rep 1010.26 -10.38 -1.02 +9.62 Poland 2267.94 -34.27 -1.49 +16.43 Hungary 34045.32 -101.17 -0.30 +6.38 Romania 8424.48 -32.13 -0.38 +18.91 Greece 779.96 -9.12 -1.16 +21.18 Russia 1078.21 -26.09 -2.36 -6.43 South Africa 47836.72 +332.65 +0.70 +8.96 Turkey 95015.45 -709.50 -0.74 +21.60 China 3090.40 -14.04 -0.45 -0.43 India 30528.07 -130.70 -0.43 +14.65 Currencies Latest Prev Local Local close currency currency

% change % change

in 2017

Czech Rep 26.64 26.49 -0.56 +1.37

Poland 4.22 4.19 -0.72 +4.34

Hungary 309.88 308.75 -0.36 -0.34

Romania 4.57 4.57 -0.05 -0.73

Serbia 123.02 123.03 +0.01 +0.27

Russia 57.61 57.07 -0.93 +6.35

Kazakhstan 313.57 313.32 -0.08 +6.40

Ukraine 26.39 26.40 +0.04 +2.31

South Africa 13.48 13.20 -2.13 +1.83

Kenya 103.20 103.25 +0.05 -0.80

Israel 3.61 3.61 -0.05 +6.67

Turkey 3.63 3.57 -1.74 -2.85

China 6.89 6.88 -0.18 +0.77

India 64.55 64.12 -0.67 +5.26

Brazil 3.14 3.14 +0.04 +3.72

Mexico 19.10 18.78 -1.67 +8.47

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 328 3 .09 7 83.03 1

All data taken from Reuters at 09:18 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT. (Additional reporting by Sujata Rao; Editing by Louise Ireland)