Frankfurt, London and Paris won about 1.0 per cent in early deals, but the gains evaporated by midday amid ongoing jitters over China and the Middle East, only to turn positive again in afternoon trading.
The euro meanwhile hit a one-month low at USD 1.0739 on news that eurozone inflation was unchanged at a weaker-than-expected 0.2 per cent in December.
Adding to the picture, oil prices dipped today as the crude supply glut overshadowed a diplomatic row between key producers Saudi Arabia and Iran.
Miners and oil firms were among the worst casualties from the fierce selloff because China is a top consumer of commodities.
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"Markets are in a very much risk-off scenario with investors not wanting to start the year off with big losses so the riskier assets are suffering, such as equity markets," said analyst James Hughes at trading firm GKFX.
"There are still worries about the stability of the Chinese economy and the ability of the rest of the global economy to come to terms with the new China, one that no longer looks to double-digit GDP growth as the norm.
Asian markets mostly fell today, with Shanghai down 0.3 per cent after a topsy-turvy session that witnessed opening losses of three percent.
State-controlled funds bought stocks on Tuesday, Bloomberg News reported, quoting people familiar with the matter, mirroring moves last year when the government waded into the market to halt a rout.
The People's Bank of China, the central bank, also pumped 130 billion yuan (USD 20 billion) into the money market, according to a statement.
"Whilst European investors may have initially taken China's market injection has a rebound-worthy bit of news, the fact is that ... This still didn't help the Shanghai Composite avoid a wild, and negative, session of trading," said Spreadex analyst Connor Campbell.
Bank (5.45 pc), SBI (5.38 pc), Bharti Airtel (5.03 pc), Tata Motors (4.52 pc), BHEL (3.67 pc), Maruti (3.66 pc), L&T (3.30 pc), Coal India (3.26 pc), NTPC (3.09 pc), Axis Bank (2.89 pc), Tata Steel (2.53 pc), M&M (2.39 pc), GAIL (2.21 pc) Bajaj Auto (2.17 pc) and Infosys (2.01 pc).
Shares of IT firm Mphasis pared most of its early gains in an extremely weak broader market, rising nearly one per cent, a day after the US-listed Blackstone said it will invest up to Rs 7,071 crore to acquire a majority stake in the IT services exporter from Hewlett Packard.
The market breadth remained negative as 1,631 stocks ended lower, 882 advanced, while 126 ruled steady.
The total turnover rose to Rs 2,853.41 crore from Rs 2,060.35 crore yesterday.