• The pan-European Stoxx 600 closed down 1.1%, with the retail and travel and leisure sectors both dropping 3% to lead the losses.
• Tech shares were off by 2.5% after a profit warning from U.S. social media firm Snap and news of layoffs at Swedish start-up Klarna.
• The World Economic Forum is taking place in Davos this week, bringing together political and business leaders from around the world.

LONDON — European stocks closed lower Tuesday as investors were rattled by fears of a looming recession.

The pan-European Stoxx 600 closed down 1.1%, with the retail and travel sectors both dropping 3% to lead the losses as most sectors fell into negative territory. Tech shares were off by 2.5% after a profit warning from U.S. social media firm Snap and news of layoffs at European start-ups Klarna and Gorillas.

Shares of British power generation company Drax Group sank nearly 14% toward the bottom of the Stoxx 600 after Citi cut the stock to "sell" from "neutral" and lowered its price target. Leading gains in Europe was Danish hearing aid company GN Store Nord, which surged more than 11%.

European shares, which had closed higher on Monday, retreated from those gains amid warnings about a possible recession. On Monday, Swedish buy now, pay later firm Klarna said it plans to let go about 10% of its employees, blaming the economic fallout from the war in Ukraine.

On Wall Street, stocks were sharply lower Tuesday after Snap warned it would miss its earnings guidance for the current quarter. Separately, retailer Abercrombie & Fitch posted an unexpected loss for its fiscal first quarter and slashed its outlook for 2022.

Day 2 of Davos

The World Economic Forum is taking place in Davos this week, bringing together political and business leaders from around the world. This year's summit comes after several years of Covid-19 pandemic and amid Russia's invasion of Ukraine, which is at the top of the agenda.

On Tuesday, CNBC spoke to a wide range of leaders, including the chairmen of Publicis Groupe and Standard Chartered, the CEOs of Nokia and ABB and Gita Gopinath, first deputy managing director of the IMF, among many others.

On the data front in Europe, a flash purchasing managers' index (PMI) for the euro zone in May came in at 55.8, slightly ahead of estimates, as business growth across the continent slowed but remained resilient.

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- CNBC's Ryan Browne contributed to this report