European shares rose on Wednesday, with Italian lenders rebounding from sharp losses in the previous session after the government eased its stance on a new banking levy.

By 0705 GMT, the pan-European STOXX 600 added 1.0% to touch a one-week high.

Euro zone banks gained 1.4% after a 3.5% slump a day earlier, as Italy set a cap at 0.1% of total bank assets for the new tax, after a surprise announcement of a 40% windfall tax on lenders sparked a sell-off.

Italian lenders such as Intesa Sanpaolo, Banco BPM and UniCredit added between 1.7% and 2.5%.

Investors also appeared to shrug off data that showed China’s consumer sector fell into deflation and factory-gate prices extended declines in July, as the world’s second-largest economy struggled to revive demand.

European stock markets drop as banks hit

Among individual stocks, Delivery Hero climbed 5.8% after the German online takeaway food company raised its full-year revenue outlook.

Novo Nordisk inched up 0.5%, extending gains from Tuesday when the Denmark-based drugmaker’s shares hit a record high after it said its obesity drug reduced the risk of heart disease.