European stocks rebound after Italy softened its position on the bank tax

European stocks rose on Wednesday as Italian bank stocks recovered from heavy losses incurred in the previous session after the government softened its position on a new tax on banks.

The Stoxx Europe 600 index rose 1 percent by 0705 GMT, touching its highest level in a week.

The euro zone banking index rose 1.4 percent, after falling 3.5 percent in the previous session, after the Italian government set a new tax ceiling of 0.1 percent of total banking assets. The announcement of the sudden 40 percent tax on bank windfall profits triggered a broad sell-off.

Italian banks such as Intesa Sanpaolo, Banco BPM and UniCredit rose between 1.7 and 2.5 percent.

Investors did not seem to care about data showing that the consumer sector in China had entered a period of contraction in prices, with producer prices continuing to decline in July at a time when the second largest economy in the world was facing difficulty in reviving demand.

Novo Nordisk rose 0.5 percent, extending its gains from yesterday’s session, when it jumped to a record high, after the Danish pharmaceutical company said its drug for the treatment of obesity reduces the risk of heart disease.