By Johann M Cherian

April 7 (Reuters) - The emerging market stocks index on Monday was heading for its biggest one-day selloff since the 2008 global financial crisis, as U.S. President Donald Trump remained determined to upend the global trade order that markets worry could trigger a recession.

Investors started the week parsing Trump's comments that signaled they would have to endure more pain and he would not do a deal with China until the U.S. trade deficit was sorted out, which drove MSCI's EM stocks index down by 7.9%.

A currencies gauge .MIEM00000CUS weakened 0.4% to the dollar and was set for its largest daily drop since November, with those of China CNH=, India INR= dipping 0.4% each, while South Africa's rand ZAR= and Mexico's peso MXN= weakened over 1% each.

Financial assets in the developed, developing and the frontier world along with commodity prices were extending last week's rout after the U.S. President's restrictive trade policies was met with quick retaliation from Beijing, fanning worries that a global trade war could weigh on economic performance.

Investors are also anticipating a response from Europe this week, while other trade-reliant economies in south east Asia are hoping to strike trade deals with the U.S.

"Investors had assumed Trump's trade taxes were a bargaining tool, as during the first term. If the competence of policymaking is questioned, markets will worry that economic damage will be lasting," said from Paul Donovan, chief economist at UBS Global Wealth Management.

On Monday, equities in China .SSEC, .CSI300 slid 7% and those in Hong Kong .HSI tanked 13.2% - its steepest decline since 1997. Brokerage Goldman Sachs said it expects Chinese policymakers to accelerate fiscal easing measures significantly to offset the repercussions of higher tariffs.

MSCI's index tracking Asia-Pacific shares outside Japan .MIAPJ00000PUS slid 8.4% and a plunge in Korean shares .KS11 triggered a trading curb for the first time in eight months.

Investors also began to bet on the increasing likelihood of corporate and sovereign credit defaults, as the five-year credit default swap spread on the Markit Itraxx Asia ex-Japan index, widening to its highest since August last year, according to S&P Global Market Intelligence data.

The default swaps on China jumped 82 basis points, while that of South Africa climbed seven bps.

International sovereign bonds of a number of frontier markets also suffered sharp selloffs with those of Sri Lanka XS2966242336=TE, Egypt XS1953057491=TE and Kenya XS1781710626=TE falling over 4 cents on the dollar.

Markets were pricing in that a stronger dollar against weaker emerging market currencies, combined with a weak global trade environment could increase the risk of a debt spiral in emerging markets.

Some economies such as Sri Lanka and Pakistan were just regaining their footing after defaults triggered by the COVID pandemic.

Pakistan's hard-currency bonds lost over 10 cents putting it below the 70 mark, widely perceived as distressed debt.

Worries of a global recession also had markets pencilling in the likelihood that the U.S. Federal Reserve could lower borrowing costs by at least five 25 basis points by December, according to data compiled by LSEG.

Markets are also expecting sluggish economic performance to also speed up interest rate cuts by central banks in developing economies at their upcoming monetary policy meets, such as India and Singapore.

The market rout continued, with equities in South Africa .JTOPI Indian .NSEI, .BSESN and Turkey .XU100 falling about 2% to 4% each.

An index tracking central and eastern European stocks tumbled 4.7%, with those of more open economies such as Czech Republic .PX and Hungary .BUX falling 5.4% and 6.9%, respectively.

Hungary's forint EURHUF= depreciated 0.5% against the euro and Poland's zloty EURPLN= dropped 0.8%.

Currencies such as the euro EUR= and Swiss franc CHF= outperformed the dollar as markets priced in the likelihood that the U.S. economy could also be hit with a recession, in the face of tighter trade.

(Reporting by Johann M Cherian in Bengaluru; Editing by Shailesh Kuber)

((johann.mcherian@thomsonreuters.com;))