Rio in the red after job cuts

Rio Tinto is down 3.5% this morning due to cost-cutting and woes over global demand.

The Anglo Australian firm recently revealed 40 job losses at their iron ore headquarters in Western Australia, as part of a wider plan to save £3.3 billion by the end next of year. Sam Walsh took over as chief executive officer earlier this year, and has the task of trimming down the non-core assets and stripping out the underperforming sections of the business.

Ordinarily the announcement of a cost-cutting programme would boost the company’s share price, but investors are reading this announcement as a sign that there is more to come. Although 40 jobs at one of the biggest mining companies in the world is a small percentage, this may just be the tip of the iceberg.

The mining sector as a whole has lost 25% since February; investors are concerned that China is slowing down which would mean that their demand for minerals will drop. Overnight, the HSBC Chinese manufacturing purchasing managers index (PMI) dropped to 48.3 in June, and any reading below 50.0 indicates a contraction. If Chinese manufacturing remains weak we could see further job losses at Rio Tinto, which may put further pressure on the share price.

Rio Tinto plc chart

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