Recasts from London, updates throughout

By Dhara Ranasinghe and Tom Westbrook

LONDON, April 29 (Reuters) - World stocks and the dollar edged up on Tuesday after U.S. President Donald Trump's administration said it planned to reduce the impact of auto tariffs, a further sign of flexibility on a trade policy that has wreaked havoc on markets in April.

Market focus was also turning to the early signs of the impact tariff pain is having from economic data and the latest company earnings.

European shares .STOXX and U.S. stock futures traded higher ESc1, 1YMc1.

Canada's dollar dipped against a broadly-firm U.S. currency as Canadian Prime Minister Mark Carney's Liberals retained power in Monday's election, but fell short of the majority government he had wanted to help him negotiate tariffs with Trump.

The United States said it would move to reduce the impact of duties imposed on foreign parts in domestically manufactured cars, and keep tariffs on vehicles made abroad from stacking up on other duties, officials said.

"There is a focus on the tariff news getting less worse but there's also a focus on hard data and whether the market is right to worry about a recession," said State Street Global Markets' head of macro strategy Michael Metcalfe.

First-quarter U.S. GDP and April jobs figures are due out this week.

While the S&P 500 .SPX has recovered much of its early April losses after some rollback on Trump's tariffs, it looks set to end the month down around 1.5% in its third straight month of falls.

European stocks opened higher, with plenty of earnings to digest. HSBC HSBA.L launched a $3 billion share buyback after reporting a 25% fall in first-quarter profit, Deutsche Bank DBKGn.DE posted a 39% rise in first-quarter profit and sports-car maker Porsche cut its 2025 outlook on weakness in China and U.S. tariffs.

Coca-Cola KO.N, General Motors GM.N and Visa V.N are due to report later on Tuesday while mega-caps Apple AAPL.O, Microsoft MSFT.O, Amazon AMZN.O and Meta Platforms META.O report later in the week.

In Asia, Japanese markets were closed for a holiday, while Hong Kong's Hang Seng .HSI was little changed and the mainland blue-chip index .CSI300 fell 0.2%. .HK

TRADE

Markets were rattled overnight when U.S. Treasury Secretary Scott Bessent told CNBC it was "up to China to de-escalate" tariffs and there are growing worries that unless there is a breakthrough, permanent damage will be wrought on supply chains.

China has moved to make some exemptions but has held off on stimulus, betting Washington blinks first.

"A true de-escalation (in the U.S.-China trade war) is some time away, in our view," Sat Duhra, portfolio manager at Janus Henderson, told the Reuters Global Markets Forum on Tuesday.

"Someone will blink first, and it is likely to be led by the market as we have seen in the U.S."

JP Morgan analysts said the clock was ticking on hard data resilience, highlighting a 42% peak-to-trough slump in China shipments to the U.S. in the past 10 days, which - if sustained - would reverberate through supply chains.

"A worrying decoupling of U.S.-China trade ... now looks to be underway, and we expect the damage to build in coming weeks and months."

DOLLAR FIRMS

The dollar rose against other major currencies, adding 0.25% to 142.38 yen JPY=EBS. The euro dipped 0.12% to $1.1408, while sterling was down about 0.2% to $1.3417 EUR=EBS, GBP=.

Still, the euro is up 5% in April, set for its largest monthly rise on the dollar in nearly three years, while the greenback's 6.7% drop on the safe-haven Swiss franc CHF=EBS is the largest in a decade.

Canada's dollar traded at around 1.3821 per U.S. dollar CAD=, little changed on the day, following Monday's Canadian election.

"A thin parliament lead is hardly positive news for a country’s currency, but Canadian dollar losses have been quite limited in size," ING analysts said in a note.

The stronger dollar set gold XAU= back 0.6% to $3,320 an ounce. Brent crude LCOc1 was 1.4% weaker at $65 a barrel.

Treasury yields edged up in London trade, rising 2.5 basis points to 4.245 US10YT=RR.

(Reporting by Dhara Ranasinghe in London and Tom Westbrook in Singapore; additional reporting by Ankika Biswas in Bengaluru; Editing by Saad Sayeed)

((Dhara.Ranasinghe@thomsonreuters.com; +442075422684;))