TOKYO (Reuters) -A legal roadblock on U.S. President Donald Trump's sweeping tariffs drew early cheer from markets on Thursday, but the risks of extended policy and economic paralysis cast a deeper shadow for investors worried about the longer term.

Most equity markets are back above water after routs following Trump's "Liberation Day" tariffs announced nearly two months ago, only to be repeatedly delayed and adjusted since then. The latest twist is a U.S. trade court blocking the levies from going into effect.

Trump's administration immediately appealed the ruling, but it breathed some optimism, however temporary, into risk assets and the U.S. dollar, one of the biggest losers from the chaotic tariff rollout.

The prolonged uncertainty from Wednesday's ruling, however, will take an economic toll on firms longer-term, said David Chao, global market strategist for Asia Pacific at Invesco.

"My big worry is that companies start to put off things like hiring or capital expense or giving people raises for these factories or manufacturing," he said. "And that could certainly put a damper then on company earnings and consumption could also be impacted by that."

Following the market revolt after his April 2 tariff shock, Trump paused most import duties for 90 days and vowed to hammer out bilateral deals with trade partners. 

However, other than a pact with Britain this month, agreements remain elusive and the court's stay on the tariffs may dissuade countries like Japan from rushing into deals, Chao added. 

For now, the ruling is a "marginal positive" for sentiment as it minimises the most bearish outlooks on growth, said Charu Chanana, chief investment strategist at Saxo in Singapore.

"Trump may still have scope to appeal or impose narrower, sector-specific tariffs, so policy uncertainty lingers," Chanana said. "Businesses still don't have clarity, and the policy path remains fluid."

Markets have swung wildly through Trump's on-and-off tariff changes. The S&P 500 index is up 3.8% since they were announced, European stocks are up 2.2%, while China's benchmark indexes are nearly flat.

Gold is off record highs but still up more than 4% in these eight weeks, and the U.S. dollar index is down 4%. Ten-year Treasury yields have climbed 30 basis points to around 4.5%.

News of the Court of International Trade's ruling sent stock benchmarks across Asia higher, led by South Korea's Kospi and Japan's Nikkei. Both are up more than 7% from "Liberation Day" when Trump's tariff chaos and concern about expanding U.S. deficits triggered an exit from dollar-based securities into other assets.

For now, that pressure has abated, though caution must be exercised in case higher courts undo the latest ruling, said Sean Callow, senior analyst at ITC Markets in Sydney. 

"The weight of money is being placed on the possibility that U.S. courts prevent the White House from self-imposed economic damage, brightening U.S. growth prospects and the U.S. dollar," he said.

Volatility and policy reversals are what define this trading environment and investors are reacting in kind, said Ray Sharma-Ong, head of multi-asset investment solutions for Southeast Asia at Aberdeen Investments.

"Trade and portfolio strategies have shifted toward shorter investment horizons," he said. "Portfolios have leaned more toward tactical trades, with positions focused on key catalysts and events linked to Trump's policies."

Ultimately, this trade uncertainty is toxic to investment and economic growth, driving chief executives and policymakers to put off major decisions, said Kei Okamura, a portfolio manager for Neuberger Berman in Tokyo.

"This stop and go is not helpful for businesses that need to make decisions that can take several years, even a decade, to implement," Okamura said. "For central banks, this development just reinforces their wait-and-see stance."

(Reporting by the Asia markets team. Writing by Rocky Swift. Editing by Sam Holmes.)