(Reuters) – European shares edged lower on Wednesday, as surging coronavirus infections threatened a recovery in the global economy, with gains in defensive sectors helping limit losses.

The pan-European STOXX 600 fell 0.4%, with banks .SX7P, travel & leisure .SXTP and energy companies .SXEP dragging the main index lower.

London-listed HSBC (HSBA.L) tumbled 4% after Bloomberg reported that U.S. President Donald Trump’s top advisers weighed proposals to undermine the Hong Kong currency’s peg to the U.S. dollar. The proposal could possibly limit the ability of Hong Kong banks to buy dollars.

Finland’s Nokia (NOKIA.HE) slumped 7.5% to the bottom of the STOXX 600 on concerns that the company was losing the business of its key client Verizon (VZ.N) in the United States. J.P.Morgan downgraded it to “neutral”.

Market sentiment soured overnight on Wall Street as the U.S. coronavirus outbreak crossed a grim milestone of over 3 million confirmed cases on Tuesday, while the World Health Organization acknowledged “evidence emerging” of the airborne spread of the virus.

“European markets have continued to look soft this morning on concern that rising cases in the U.S. across the southern states could stall the recovery there,” said Michael Hewson, chief market analyst at CMC Markets.

The STOXX 600 climbed to a near one-month high earlier this week as improving economic data and bets of a swift rebound in China drove gains, but investors remained cautious about the progress of an European Union recovery fund and the upcoming earnings season.

Analysts expect companies listed on the STOXX 600 to report a 53.9% decline in profit in the second quarter, according to Refinitiv data.

“While these expectations look broadly consistent with our economists’ forecast of minus 15% global GDP growth in Q2, activity rebounded more than expected in May and June,” equity analysts at Barclays wrote in a note.

London’s blue-chip FTSE 100 .FTSE edged 0.3% lower ahead of British finance minister Rishi Sunak’s next round of plans to prevent a wave of job cuts. [.L]

Swedish home appliance maker Electrolux (ELUXb.ST) jumped 6.7% after saying its second-quarter operating loss would be smaller than feared, helped by a 3% rise in June sales and cost controls.

Gains for defensive sectors such as telcoms .SXKP, food & beverage .SX3P and healthcare .SXDP helped the STOXX 600 come off early lows.

Boohoo (BOOH.L) slumped for the sixth day running, hit by news that Next Plc (NXT.L), Zalando SE (ZALG.DE) and Amazon.com Inc (AMZN.O) were delisting products made by the UK online fashion retailer.

Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila

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