German stocks fell sharply on Tuesday as U.S. treasuries fell along the curve amid bets for a Fed policy rate hike as soon as March.
The benchmark DAX fell 178 points, or 1.1 percent, to 15,755 after closing 0.3 percent higher on Monday.
Tech stocks lost ground, with Infineon Technologies falling more than 2 percent.
Automakers BMW, Daimler and Volkswagen fell between 0.9 percent and 1.4 percent as industry data showed new car registrations in the EU dropped 22.8 percent year-on-year to 795,295 units, after a 20.5 percent slump in November.
Luxury fashion brand Hugo Boss AG was down 0.6 percent. The company reported higher operating profit and revenues in its fourth quarter.
Nordex AG fell about 1 percent. The company said that in line with its previous projections, it has recorded a rise in order intake for wind turbines in the year 2021, amidst a strong demand from across the globe.
Evotec was slightly lower after entering into a drug discovery collaboration with Eli Lilly and Company in the field of metabolic diseases with a focus on kidney diseases and diabetes.