European stocks were up in morning trade, rebounding from the previous session's pull-back as investors bet U.S. housing data will give further evidence of economic recovery and eclipse recent worries over Chinese growth.

Investors awaited monthly U.S. existing home sales, due at 10 a.m. E.D.T. (1400 GMT), seeking confirmation the supply of homes on the market was being whittled down. Economists in a Reuters survey forecast a 4.62 million annualized unit total versus 4.57 million January.

Oracle (ORCL.O) will be in the spotlight after beating earnings estimates after new software sales came in at the high end of the company's forecast, offsetting a sharp drop in hardware revenue. Shares of the company traded in Frankfurt (ORCL.F) were up 2.6 percent[ID:nL1E8EKK4G]

The U.S. Federal Reserve may need to start moving away from its near-zero interest rate policy as soon as this year, if unemployment continues to drop and inflation threatens to rise, a top Fed official told reporters. "I would see an argument for initiating that exit in 2012 or 2013," Narayana Kocherlakota, president of the Minneapolis Federal Reserve Bank, said.

A growing number of U.S. cities are choosing to fund essential services like public safety and garbage collection over making payments on outstanding debt, as rising costs and falling revenue deplete their budgets.

So far, the bond defaults are not roiling the $3.7 trillion municipal market because insurance companies are stepping in to make payments to bondholders in some cases. But defaults on insured bonds are putting pressure on these insurers, which never fully recovered from the financial crisis.

The head of the Chicago Board Options Exchange's (CBOE.O) market-regulation department has left the company, the second compliance official to leave the exchange amid a regulatory investigation, the Wall Street Journal reported.

U.S. crude futures nursed losses to trade below $107 a barrel in early Wednesday trade in Asia, after Saudi Arabia helped push oil 2 percent lower in the previous session with comments that it was prepared to meet any supply shortfall.

U.S. staffing provider On Assignment (ASGN.O) is to buy privately held rival Apex Systems for $600 million, including debt, and said it expected the deal to significantly add to 2012 earnings. On Assignment shares, which have more than doubled in nearly six months, rose 31 percent to $17.87 in trading after the bell. They closed at $13.68 on Tuesday on the Nasdaq.

GlaxoSmithKline (GSK.L) and Johnson & Johnson (JNJ.N) are taking a new tack in the hunt for tomorrow's drugs by linking with venture capital firm Index Ventures. The two drugmakers will contribute half the funding for a 150 million euros ($199 million) fund being launched by Index to invest in early-stage life sciences projects, primarily in Europe.

A warning about China's growth sparked selling in energy and industrial shares on Tuesday, but the broad market's losses were contained, a sign of resilience for U.S. stocks.

The Dow Jones industrial average .DJI fell 68.94 points, or 0.5 percent, to 13,170.19 at the close. The S&P 500 Index .INX lost 4.23 points, or 0.3 percent, to 1,405.52. The Nasdaq Composite .IXIC dipped 4.17 points, or 0.1 percent, to 3,074.15.

(Reporting by Blaise Robinson; Editing by Dan Lalor)

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