Mr. Market’s mood swings

28th October 2016

At this turbulent point in time, we have seen a very telling show of wider market sentiment this week following the trading update of Amec Foster Wheeler.

Amec Foster Wheeler issued a trading update on Thursday in which it stated that the company had made good progress in defining its strategies, had identified additional cost savings and that the board’s expectations for 2016 remained unchanged. Next year was seen to be tougher given the weakness within the Oil & Gas market, but that was not new news, and the overall the picture looked more or less stable. Its share price closed down nearly 21% in response. So, what happened?

In addition to the points above, the statement also announced that the Capital Markets Day (CMD) would be postponed from its original date in November to March 2017. While the company explained this was to allow more time for the wide-ranging review it is undertaking, it appears the market has seen it differently and feels there is now more uncertainty around the company’s strategy. As the share price fell and analyst commentary published on the day attested, the market felt there might be “more acute” issues at the company than they had first thought given the postponement of the CMD.

While this is clearly an unfortunate turn of events for Amec Foster Wheeler, it speaks volumes about the current mood in the market. The share price reaction on the day of the update, which continued into the following day, reveals much about the jumpy and slightly trigger-happy state of mind many investors are in, as news like this, announced in a calmer market, may well have passed by with a much more limited impact on the share price.