All sectoral indexes were trading in negative territory, pushing the pan-European STOXX 600 <.STOXX> index to fall for the seventh straight session, down as much as 3.2 percent, while the euro STOXX volatility <.V2TX> posted its biggest ever daily percentage gain, up 60 percent.

The STOXX index recovered some ground through the session and closed down 2.3 percent with confidence in the region's economic recovery partly offsetting concerns about the rising volatility.

"Price action is clearly driven by technical factors, tied to a brutal awakening of stock volatility," said Alessandro Balsotti, head of asset management at JCI Capital Ltd.

"Ultimately I think the robust economic phase will be able to withstand the bloodshed on volatility," he added.

Wall Street fell around 4 percent during the previous session but limited its losses on Tuesday with the Dow Jones Industrial Average <.DJI> falling 0.6 percent and the S&P 500 <.SPX> 0.9 percent.

The sell-off followed a stronger than expected jobs report in the U.S. last week that fueled worries over inflation and concerns the Federal Reserve will raise rates at a faster pace than expected.

Although the steep declines on Wall Street from record highs spilled over to other markets, some investors believe European equities could outperform the United States as the region's economic and monetary policy cycles are at a less mature phase.

"It seems that the much-heralded interest rate rise has finally started. This is justified in the United States... but it is less justified in the euro zone, where interest rate levels seem excessive," Natixis strategists said.

"This correction is a buying opportunity," they added.

After a strong 2017, European shares rallied in January to reach their highest level in around 2 years on expectations that economic growth would boost company profits.

February's pull back has pushed the STOXX 600 about 7 percent below its January peak.

Among the top fallers on Tuesday were Credit Suisse (>> Credit Suisse Group) down 6 percent after it said it would redeem early a popular exchange-traded notes that bet against wild downward swings in the markets.

Among the biggest sectoral fallers were banks <.Sx7P>, which fell 2.8 percent.

Intesa Sanpaolo (>> Intesa Sanpaolo) however rose 0.7 percent after Italy's biggest retail bank pledged to halve its soured loans and grow revenue strongly while cutting costs under a new four-year plan. Traders also said the market welcomed Intesa's dividend plans.

Among the few stocks in positive territory, AMS (>> ams) jumped 13.15 percent after the chipmaker reported a surge in fourth-quarter profit as the Austria-based group benefited from rising demand for the sensors it makes for smartphone producers such as Apple (>> Apple).

(Additional reporting by Julien Ponthus,; Editing by Janet Lawrence)

By Danilo Masoni