Europe's economic sentiment turned down this month, after two months of rising sentiment, as manufacturers and builders faced a drop in orders, according to a survey released by the European Commission Thursday.

The overall reading of the EC's economic sentiment index dipped 0.1 points to 94.4. Sentiment was negative across nearly all sectors, excluding services, retail and among consumers.

The report's findings helped fuel a headache in Europe's markets, with stocks falling sharply. In afternoon trading, the Stoxx Europe 600 index fell 1.3 percent to 260.74, and the German DAX 30 index fell 1.8 percent to 6,875.15.

The EC's findings showed Germany taking the biggest hit, with sentiment remaining negative at -2.4, joined by the U.K. at -2.5, the Netherlands with -1.3 and Spain with -1.1.

Industrial confidence fell within the 27-member EU to -7.1. Consumer confidence in the EU rose 0.8 points to -19.3 and was up 1.2 point in the euro zone area to -19.1.

The report does little to change the view that Europe's economy remains in the throes of a stagnation, and faces a long slog back to consistent growth and optimism, according to anaylsts.

Overall, not a big change from last month. But another dent in hopes that recent developments like the ECB's LTRO (long-term funding operations) and the Greek rescue package would help to facilitate a decent recovery in the euro zone economy, Capital Economics said, according to Reuters.