By Sruthi Shankar

European shares fell on Tuesday as surging U.S. coronavirus cases and forecasts for a deeper-than-feared recession in the euro zone dimmed optimism around a post-pandemic rebound.

The pan-European STOXX 600 index slipped 1%, falling back from a near one-month high.

Banks <.SX7P>, which had surged 4% in the previous session tracking a global rally after China moved to prop up its market, fell 1.3%. Travel and leisure, real estate <.SX86P>, and technology <.SX8P> shares dropped more than 1.5% each.

German drugs and pesticides maker Bayer slumped 6.9% on news that a U.S. judge questioned a long-negotiated settlement of lawsuits claiming its widely used weedkiller, Roundup, caused cancer.

The European Commission said the 19 nation single currency area would contract by a record 8.7% this year before rising by 6.1% in 2021. In early May, the Commission had forecast a downturn of 7.7% this year and a rebound in 2021 of 6.3%.

"We are taking a more cautious stance because a lot of the assumptions are increasingly priced in as certainties. That is something that worries," said George Efstathopoulos, a portfolio manager at Fidelity Investments.

"A lot of the improving data are in response to the removal of physical constraints. They don't really tell us anything about consumption hugely affected by unemployment numbers."

Several U.S. states posted record daily coronavirus case counts this month, prompting many to reverse reopening plans as U.S. death toll topped 130,000.

French catering and food services group Sodexo dropped 6.9% as it forecast fourth-quarter and half-year sales to fall harder than previously expected due to the impact of the coronavirus pandemic.

Heidelbergcement slipped 1% after the company said a review of its assets had forced it to book an impairment of 3.2 billion euros due to the fallout of the pandemic.

British online fashion retailer Boohoo slumped 14.1%, extending losses following a report about dire working conditions in one English factory.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D'Silva)