Bayer (BAYGn.DE) and Onyx Pharmaceuticals (ONXX.O) failed to show in a late-stage clinical study that their blockbuster drug Nexavar can prolong the lives of patients with lung tumors, the largest target group in the cancer market.

ICSC/Goldman Sachs release at 1145 GMT chain store sales for the week ended May 19. In the previous week, sales fell 0.8 percent.

Private equity firm CVC Capital CVC.UL has sold a $1.6 billion stake in Formula One to three investors including BlackRock (BLK.N) ahead of the motor racing company's planned $3 billion initial public offering in Singapore, sources said on Tuesday.

Redbook releases at 1255 GMT its Retail Sales Index of department and chain store sales for May versus April. In the prior period, sales fell 0.8 percent.

British bank Barclays (BARC.L) is selling its near-20 percent stake in U.S. asset manager BlackRock (BLK.N), worth $6.1 billion, as tougher global regulations have cut the attraction of such holdings.

National Association of Realtors (NAR) releases at 1400 GMT existing home sales for April. Economists forecast a 4.60 million annualized unit total, versus 4.48 million in March.

Federal Reserve Bank of Richmond releases at 1400 GMT May indexes for area manufacturing and service sectors. In April, the composite manufacturing index was 14 and the manufacturing shipments index read 18.

In the run-up to Facebook's (FB.O) $16 billion IPO, Morgan Stanley (MS.N), the lead underwriter on the deal, unexpectedly delivered some negative news to major clients: The bank's consumer Internet analyst, Scott Devitt, was reducing his revenue forecasts for the company.

The Asian prime brokerage units of Credit Suisse (CSGN.VX) and Bank of America Corp (BAC.N) gained market share in the last one year when Goldman Sachs (GS.N) and Morgan Stanley (MS.N), the top-two industry players, lost hedge fund clients and assets, a survey showed.

Accor (ACCP.PA) agreed to sell its troubled U.S. budget hotel business for $1.9 billion to private equity group Blackstone, part of an effort by the French hotel group to focus on growth outside the United States.

BATS Europe is in talks with exchange rivals over a clearing deal that will allow the share trading platform to break into European futures and challenge incumbents NYSE Euronext (NYX.N) and Deutsche Boerse (DB1Gn.DE).

A sharp fiscal contraction next year could derail the U.S. economic recovery, the Organisation for Economic Co-operation and Development warned on Tuesday as it urged the government to move only gradually to tighten its budget.

Major companies announcing results include Dell (DELL.O), Best Buy (BBY.N) and Medtronic (MDT.N).

European stocks .FTEU3 rose 0.9 percent on Tuesday, extending the previous day's tentative recovery from a two-month slump as expectation of new measures to fight the euro zone debt crisis and reports about Chinese infrastructure investments boosted sentiment.

China will fast track approvals for infrastructure investment to combat a slowdown in the economy, a state-backed newspaper reported on Tuesday, underlining a call by Premier Wen Jiabao for policies to maintain growth.

U.S. stocks rose more than 1 percent on Monday, with the S&P 500 snapping a six-day losing streak in a rebound from equities' biggest weekly drop in almost six months, but Facebook slumped in its second session after a disappointing debut.

The Dow Jones industrial average .DJI jumped 135.10 points, or 1.09 percent, to 12,504.48 at the close. The Standard & Poor's 500 Index .SPX climbed 20.77 points, or 1.60 percent, to 1,315.99. The Nasdaq Composite Index .IXIC rose 68.42 points, or 2.46 percent, to close at 2,847.21.

(Reporting by Atul Prakash. Editing by Jeremy Gaunt.)

• A Permanent Economic Emergency