Asian stocks still in the red on European concerns

Asian markets continued their downward spiral today amidst concerns surrounding the European economy. In trading, the MSCI Asia Pacific Index lost 2.1% and the Nikkei 225 Stock Average sank 2.2% after Japan’s markets resumed after a holiday.

Australian miners were worst hit during the trading day today, taking large losses. The S&P/ASX200 Materials index was down by a massive 3.9% as commodity prices across the board continued to decline. There is a real concern that the iron ore price will continue to fall, ending a honeymoon period which has seen it rise by almost four times since its 90s decade low.

The key losers are the emerging, high cost iron ore producers in the Pilbara region of Western Australia. Murchison Metals which owns 50% in the Crosslands Resource and Oakajee Port and rail in the Pilbara region, in joint ventures with Mitsubishi, closed 19.5% lower today.

Listed heavyweight Rio Tinto was also down today, shedding 3.9%. Not only does Rio have downside exposure to the iron ore price but news around its Mongolian mining exposures did little to help contain the decline in sentiment.

Long-running tensions between Rio and its Oyu Tolgoi partner – Ivanhoe Mines – are set to flare again. News that the Mongolian government is also looking at revising its interest in the project increases sovereign risk concerns.

Australia remains an attractive destination for resource and minerals development projects, but the short term fallout from lower commodity prices probably still has a little left to run.

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