* Strong U.S. earnings, hopes of China policy support lift shares
* Wall Street volatility gauge hits 7-month low
* Trade disputes, waning impact of US tax cuts cast shadow
By Hideyuki Sano
TOKYO, Aug 8 (Reuters) - Asian shares rose on Wednesday on the back of firmer Wall Street earnings while expectations for increased Chinese stimulus helped take the edge off wider concerns about the worsening Sino-U.S. trade dispute.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.22 percent while Japan's Nikkei ticked up 0.05 percent.
On Wall Street, the S&P 500 rose 0.28 percent to 2,858, which is just 14 points, or about 0.5 percent, below its record high marked in January.
A strong second-quarter earnings season fuelled optimism about U.S. economic strength. S&P 500 firms saw a 23.5 percent rise in their April-June profits, according to Thomson Reuters data.
Against this backdrop, the CBOE volatility index, a measure of investors' expectation on U.S. share price volatilities and often viewed as a gauge of anxiety in financial markets, fell to a seven-month low of 10.93.
Tesla jumped 11 percent after Chief Executive Elon Musk said he was considering taking the electric car maker private.
In China, share prices rebounded on Tuesday following a heavy four-day selloff partly as infrastructure firms were bolstered by expectations of increased spending on public works projects.
"China's apparent policy shift from structural reforms to short-term policy support appears to be starting to give some support to other major markets," said Chotaro Morita, chief fixed income strategist at SMBC Nikko Securities.
"Yet the reason they have to do so is escalating trade tensions so you can't expect much upside. On the other hand, a boost to the U.S. economy from tax cuts is peaking out soon. In coming months, the focus will be how markets will price in this peak out," he added.
In a stark reminder that the Sino-U.S. trade dispute has worsened, the U.S. Trade Representative's office said on Tuesday Washington will begin collecting 25 percent tariffs on another $16 billion in Chinese goods on Aug. 23.
In the foreign exchange market, major currencies kept to tight ranges. The euro was at $1.1599, off Monday's five-week low of $1.1530.
The yen stood little changed at 111.38 per dollar while worries about a hard Brexit kept the sterling at $1.2938 , just above its 11-month trough of $1.2920 set on Monday.
The Chinese yuan held firm near one-week high in the offshore trade, extending its rebound after the central bank on Friday took steps to curb bets against the currency by raising the cost for investors to short the yuan.
The Turkish lira, the biggest mover in recent days, kept some distance from Monday's record low, trading at 5.2600 per dollar, versus Monday's low of 5.425.
Still, it is down almost 7 percent so far this month.
Oil prices held firm after U.S. sanctions on Iranian goods went into effect, intensifying concerns that sanctions on Iranian oil, expected in November, could cause supply shortages.
Brent futures stood at $74.63 a barrel, flat on the day but maintaining gains of about 2 percent so far this week. U.S. West Texas Intermediate (WTI) crude futures traded at $69.25 per barrel, up 0.1 percent on the day for a gain of 1.1 percent this week.
Editing by Sam Holmes