The pan-European STOXX 600 opened down 1.2 percent, hitting its lowest level since Nov. 23, but recovered some losses to trade down 0.9 percent by 0930 GMT.
Financials were the biggest drag on European shares as investors dumped sectors highly sensitive to economic growth. Europe's bank index fell 1.7 percent, while oil and mining sectors fell 1.5 percent each.
"Cyclicals are really dependent upon accelerations in growth, they're very real economy sensitive for higher revenues," said John Ricciardi, CEO and lead portfolio manager at Kestrel Investment Partners.
The inversion of parts of the US yield curve means investors are beginning to panic about future growth and inflation, Ricciardi added.
Analysts have cut their estimates for 2019 earnings growth as markets turned sour this autumn.
Tech stocks fell 1.4 percent after the highly valued US tech sector sold off.
Chipmakers AMS, STMicroelectronics, and Infineon fell 1.2 percent to 4.5 percent following a sharp drop in chip stocks on Wall Street.
German carmakers outperformed the DAX as investors digested what seemed a relatively positive outcome from auto executives' meeting at the White House.
US President Donald Trump pressed carmakers to increase investments in the United States, something the executives said they planned to do but wouldn't be able to if the administration went ahead with threatened tariffs.
White House economic adviser Larry Kudlow, among those in the meeting, said he did not think that car tariffs were imminent.
Daimler and BMW were up 0.1 to 0.2 percent and Volkswagen fell just 0.2 percent.
Iliad shares fell back, down 3.7 percent after a strong rally on Tuesday when it unveiled a new high-end set-up box.
Shares in valve manufacturers Rotork and Weir , which supply the oil industry, tumbled after US energy services firm Schlumberger gave a warning on Tuesday, saying a drop in fracking activity would hit its North America revenues.
Swedish pharma firm Elekta was a rare gainer, up 3.6 percent after it won Food & Drug Administration clearance for its "Unity" radiation therapy, clearing it for commercial sales and clinical use in the United States.
M&A news was also a driver.
Shares in Shire jumped 4 percent at the open, then trimming gains to trade up 2 percent, after shareholders of Japan's Takeda approved the takeover of the London-listed pharmaceutical firm.
Among small-caps, Swedish retailer Clas Ohlson provided the latest example of the squeeze on the sector to close physical stores as shoppers switch to online.
Its shares opened down 5 percent but swung back to rise 5 percent by 0930 GMT as investors welcomed its new strategy including closures of loss-making stores in Britain and Germany.
Broker notes hit some stocks. Hargreaves Lansdown fell 5.4 percent after Morgan Stanley cut its rating to underweight.
Saint Gobain shares fell 3 percent, the worst performer on the CAC 40, after JP Morgan cut it to "neutral" from "overweight".
Altran shares fell 4.5 percent after the company announced its North America chairman Frank Kern will retire.