(Reuters) – European shares fell on Wednesday as investors feared that a resurgence in COVID-19 cases would quash hopes of a swift recovery in the global economy, while rising U.S.-China tensions also dented sentiment.

The pan-European STOXX 600 index fell 1.4%, with banks .SX7P proving a drag after a slew of negative updates. Automakers .SXAP, travel and leisure .SXTP, and oil and gas .SXEP also dragged the main index lower.

Shares in Germany’s Commerzbank (CBKG.DE) slid 4% and Dutch bank ABN Amro (ABNd.AS) dropped 5.8% after swinging to a loss in the first quarter as the COVID-19 pandemic drove up loan loss provisions.

Deutsche Bank (DBKGn.DE) dropped 3.8% on news that top managers will waive one month of fixed pay in an effort to cut costs.

The global mood tracked a grim overnight session on Wall Street after a top U.S. infectious disease expert warned that premature moves to reopen U.S. economy could have dire consequences.

European shares have climbed nearly 25% from March lows as investors hoped for a swift economic recovery as many countries emerge from lockdowns. However, stocks have lost some steam in May as countries including South Korea, Germany and China reported a rise in infections after easing restrictions.

“The consolidation in equity markets continues as the market looks for new themes and is uncertain about the shape of the recovery until we see tentative signs of normalization,” Sebastien Galy, macro strategist at Nordea Asset Management, wrote in a client note.

Further souring the mood, a leading U.S. Republican senator on Tuesday proposed a legislation that would authorize President Donald Trump to impose sanctions on China if it fails to give a full account of events leading to the outbreak of the coronavirus.

Among stocks, sensor producer AMS (AMS.S) slumped 9.4% to the bottom of STOXX 600, along with other trade-sensitive chipmakers such as Dialog Semiconductor (DLGS.DE) and STMicroelectronics (STM.BN).

Shares in Exor (EXOR.MI), the holding firm of Italy’s Agnelli family, fell 5.1% after French insurer Covea walked away from its planned $9 billion purchase of PartnerRe, the Bermuda-based reinsurer owned by Exor.

Earnings expectations are deteriorating sharply in Europe, with companies listed on the STOXX 600 now expected to report a drop of 46.7% in the second quarter, down from a fall of 44.9% forecast the week before.

For the third quarter, analyst expectations are now set for a 35.1% fall in earnings, compared with 32.7% a week ago.

All eyes will be on a speech by U.S. Federal Reserve Chairman Jerome Powell at 1400 GMT amid rising market speculation the United States could adopt negative interest rates.

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