UPDATE 2-European stocks slip as hopes of post-pandemic rebound fade

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* Bayer falls 5%, biggest drag on STOXX 600

* Stocks give up some of previous session's gains

* Micro Focus slips on bleak forecast

* Italian banks UBI and Intesa slip in takeover battle

(Updates with closing prices)

By Sruthi Shankar and Susan Mathew

July 7 (Reuters) - 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 .STOXX slipped 0.6%, falling back from a near one-month high.

The banking sector .SX7P , which had risen 4% in the previous session tracking a global rally, fell by 1.4%, while real estate .SX86P , technology .SX8P and telecoms .SXKP shares each dropped between 1% and 1.8%.

German drugs and pesticides maker Bayer BAYGn.DE slumped 5% after a U.S. judge questioned a long-negotiated settlement of lawsuits relating to its weedkiller Roundup. the economic impacts of the coronavirus crisis continue to be felt, the European Commission said the 19 nation single currency area would contract by a record 8.7% before rising by 6.1% in 2021, worse than its previous forecast. U.S. states posted record daily coronavirus case counts, prompting many to reverse reopening plans as the U.S. death toll topped 130,000. coronavirus outbreaks in some parts of the world... supports our cautious stance and adds to downside risks for the advanced economies in particular," said Jennifer McKeown, head of the global economics service at Capital Economics.

"Even if the authorities continue to shun draconian restrictions, people may choose to avoid many types of economic activity."

London's FTSE 100 .FTSE was down 1.5% as the pound GBP= rose to three-week highs on optimism that British and EU trade negotiators could find common ground. GBP/ market focus will also be on signs of progress from talks this week in Brussels on a European recovery fund, which investors hope will be provided in part as grants, as proposed by the European Union. forecasts for the rest of year saw Micro Focus MCRO.L , slide 19.6%, while French catering and food services group Sodexo EXHO.PA dropped 4.1%. copper and iron ore prices saw Rio Tinto RIO.L rise 0.4%.

Italy's UBI Banca UBI.MI and Intesa Sanpaolo ISP.MI both fell amid an increasingly bitter takeover battle, with UBI reiterating that Intesa's bid does not adequately reward shareholders in the smaller bank.