• The tumble comes after negative trading sentiment in Asia-Pacific markets overnight.
• Shares of THG soared 13% after the British e-commerce company announced a substantial equity investment led by Japanese giant Softbank.
• Investors around the world are focused on the latest inflation data this week.

LONDON — European markets closed sharply lower Tuesday, dragged down by travel and leisure shares, as investors digested inflation data.

The pan-European Stoxx 600 ended the session down by 2%, with travel and leisure stocks plunging 5.7% to lead losses, as all sectors and major bourses slid into negative territory.

The tumble comes after negative trading sentiment in Asia-Pacific markets overnight following a sell-off in tech stocks on Monday that weighed down major U.S. indexes.

Investors exited stocks like Apple and Microsoft, pushing the Dow Jones Industrial Average and the S&P 500 off their record highs.

On Tuesday, U.S. stocks extended their slide, with the Dow falling more than 400 points while the Nasdaq and S&P 500 indexes also slipped.

Investors around the world are also focused on the latest inflation data this week; China released data Tuesday that showed consumer prices data in April jumped 0.9% from a year ago, slightly missing the 1% forecast by analysts in a Reuters poll. However, the producer price index rose 6.8%, beating the 6.5% projected by analysts polled by Reuters.

U.S. inflation data is released Wednesday amid growing concerns that the Federal Reserve will be prompted to tighten its monetary policy stance as prices rise along with the reopening of the global economy.

On the data front, Germany's ZEW survey of economic sentiment for May surged to 84.4 points, a record since the survey began in 2004, up from 70.7 in April and vastly outstripping expectations of a 72.0 reading from economists polled by Reuters.

Earnings came from Ubisoft and Thyssenkrupp before the bell, causing shares of both companies to fall 2% and 10.2% respectively.

Looking at individual stocks, shares of THG, soared 11.9% to the top of the Stoxx 600 after the British e-commerce company announced a substantial equity investment led by Japanese giant Softbank.

At the bottom of the European blue chip index, meanwhile, Sweden's Evolution Gaming plunged 13.8% after announcing the pricing of block trades.

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— CNBC's Ryan Browne and Thomas Franck contributed reporting to this story.