• The U.S. consumer price index is set for release Wednesday and the producer price index is slated for Thursday.
• Euro zone inflation hit a new record high last month, coming in at 5% compared with December 2020.
• Atos plunged nearly 17% after the company said it would not achieve its 2021 profit targets.

LONDON — European stocks closed lower on Monday with global markets on tenterhooks ahead of key U.S. inflation data this week and more comments from U.S. Federal Reserve Chairman Jerome Powell on interest rate hikes.

The pan-European Stoxx 600 provisionally closed down by 1.3%, having started the trading session up by 0.3%. Tech stocks fell 3.2% to lead losses while banks, which would benefit from higher interest rates, rose 0.4%.

In terms of individual share price movement, French technology consulting firm Atos plunged nearly 17% after the company said it would not achieve its 2021 profit targets.

At the top of the benchmark, Ubisoft rose more than 4% after Take-Two Interactive announced a $12.7 billion deal to buy rival gaming company Zynga, potentially fueling speculation about further consolidation in the sector.

Global markets have a busy week ahead with the latest U.S. inflation data a key data point this week. The U.S. consumer price index is set for release Wednesday and the producer price index is slated for Thursday.

Consumer prices have jumped in Europe and the U.S. over recent months. Last Friday, inflation in the euro zone hit a new record high in December coming in at 5% compared with the same month the previous year.

In addition, investors will be looking out for more comments on the timing of forthcoming interest rate rises from Powell, as the Fed chair is scheduled to testify Tuesday at his nomination hearing before a Senate panel.

The Fed has signaled it could dial back its easy monetary policy more aggressively than some expected. Minutes from the Fed's December meeting released last Wednesday showed the central bank is planning to shrink its balance sheet in addition to hiking rates.

Markets will be keeping an eye on security talks between U.S. and Russian diplomats in Geneva on Monday that are aimed at de-escalating tensions over Ukraine.

On the data front in Europe on Monday, euro zone unemployment fell to 7.2% in November from 7.3% in October, while the Sentix index showed euro zone investor morale has risen in January from 13.5 to 14.9, ahead of analyst expectations.

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- CNBC's Ryan Browne contributed to this report