European shares rose on Wednesday, with banks leading the gains as investors awaited the US Federal Reserve's first economic projection since the COVID-19 pandemic set off a recession in February.

After trading sightly lower in the past two sessions, the pan-European STOXX 600 gained 0.8% by 0717 GMT.

Eurozone banks jumped 2.5% after sources told Reuters that European Central Bank officials were drawing up a scheme to cope with potentially hundreds of billions of euros of unpaid loans due to the coronavirus crisis.

Meanwhile, Commerzbank gained 3.9% after U.S. activist investor Cerberus called for changes to the supervisory board and strategy, including more cost cuts.

European markets have seen a broader recovery in recent weeks, with investors moving into cheap, growth-sensitive stocks such as those of banks and oil firms on hopes that the worst fallout from the health crisis is over.

While no major policy announcements are expected when the Fed wraps up its meeting later in the day, investors will scrutinise its remarks on the health of the economy.

Zara owner Inditex fell 2.3% after it booked its first ever loss in a quarter that spanned the shuttering of thousands of its stores around the world due to the outbreak.

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