Survey points to ‘new’ euro zone recession

Global markets rose yesterday as investors cautiously welcomed the result of stress tests of Spain’s banks and upbeat US economic data and looked past the threat that Moody’s might downgrade the country’s debt rating to junk status. The results of an independent audit of 14 Spanish banks were released after the market close on Friday and showed the lenders need an extra € 60 billion ($ 77.6 billion) in capital. The figure is roughly as expected and well within the € 100 billion in rescue loans that Madrid can get from fellow euro zone countries to help the banks. Also helping stocks was a slight improvement in a survey of the euro zone’s manufacturing sector. The so-called purchasing managers’ index for September was revised up slightly from its preliminary estimate released a week ago, but remains at a historically weak level. Euro zone manufacturing put in its worst performance in the three months to September since the depths of the Great Recession, with factories hit by falling demand despite cutting prices, a business survey showed — pointing to a new recession. Factories helped lift the 17-nation bloc out of its last recession but the survey suggests a downturn that began in smaller periphery countries has taken root in core members Germany and France. Arab news