World Stocks Slide As Economic Recovery Hopes Wane

"Despite all the talk of recovery and green shoots, the bottom line is that this particular survey index remains stubbornly in negative territory, indicating that all we have is an economy shrinking at a slower pace," said Paul Ashworth, senior U.S. economist at Capital Economics.

Stocks around the world were already under pressure before the Empire State survey after the dollar spiked higher following comments from Russia's finance minister Alexei Kudrin, who said at the G-8 finance ministers meeting in Italy this weekend that the U.S. currency will remain the world's main reserve currency for some time to come. Kudrin has been one of those in the Russian administration voicing worries about the dollar's status in recent months.

In recent months, the fall in the dollar has gone hand in hand with rises in commodity prices, and that in turn has helped fuel a sharp rally in mining and energy stocks.

By late afternoon London time, the dollar was 1.6 percent higher against the euro, with the single European currency trading at $1.3790. Oil prices fell below $70 a barrel, with benchmark crude for July delivery down $2.09 cents to $69.95 in electronic trading on the New York Mercantile Exchange.