Market Report: Deutsche bank switches off the media sector

The media sector has been one to be out of over the last three years - most stocks have trailed the general market rally since the low point in early 2003 and some major stocks - BSkyB and ITV included - are worth even less now than when the FTSE 100 was trading just above 3,000.

If broker Deutsche Bank is to be believed things aren't going to get much better over the coming months, and even the World Cup is not going to have a positive impact on advertising revenues. In a note to clients the broker said there are "indications of a very disappointing outlook for the TV market in June and precious little optimism among agencies and advertisers for the balance of the year".

The broker points to a number of reasons for the poor advertising market, including the growing spend on internet advertising and hiring freezes in public sector recruitment. The broker lowered its target price for ITV from 130p to 125p and also downgraded its forecast numbers for magazine publisher Emap, saying that it expects other brokers to downgrade their numbers leading to further pressure on the shares. The Deutsche Bank note dampened sentiment in the sector all day, with the sole exception being WPP, for which Deutsche maintained its "buy" rating. ITV weakened 1.5p to 113.5p and Emap closed a penny better at 880p. BSkyB, which reports third-quarter results later this week, also managed to push ahead despite the bearish sentiment, adding 4p to close at 529.5p.

Meanwhile, London shares enjoyed a strong day with the FTSE 100 pushing 59 better to close at 6,082.1, mainly on strength in mining and oils. The best performer in the FTSE 100 was Cairn Energy, up 122p to 2,448p, as Merrill Lynch and UBS urged clients to buy, increasing the target price to 2.750p and 2,800p respectively. Another surge in the price of oil sent BP 11.5p better to 688p, while Shell and BG Group, both of which report first-quarter results this week, also improved. Shell closed 27p firmer at 1,988p while BG added 26.5p to 763.5p.

News that the retailer House of Fraser has received a new bid approach set tongues wagging in the retail sector. MFI Furniture added 7.5p to close at 117.5p, amid speculation among traders that a private equity consortium may be considering a bid. There was also strong support for Carpetright, 53p firmer at 1,339p, again on chatter that buyout firms may be running the rule over the company. As for House of Fraser, the talk was that if a bid comes it is likely to be better than the 125p thought to have been offered by a consortium led by Apax Partners in March. Shares in HoF climbed 7.5p to close at 126.5p.

Second-line oil stocks also enjoyed a strong session, with Dana Petroleum 39p better at 1,140p and Petrofac 14.5p firmer, closing at 358p. The sole exception to the strong day's trading in oil stocks was Soco International, as the company took advantage of strong demand for oil stocks and good recent newsflow from its Vietnamese operations to launch a $250m convertible bond, the first FTSE 250 oil stock to do so. The company also took advantage of strong institutional demand for the issue to increase its size from the $200m it initially sought to raise, although the increase in the company's debt sent the shares 45.5p lower to close on 1,516p.

The perils of investing in smaller oil exploration and production companies seem to have been all but forgotten in the past few months, but the Aim-listed Matra Petroleum gave investors a timely warning that the risks are still high - the shares fell almost 30 per cent to 4.75p yesterday after the company said that its Blue Topaz-9 in Hungary contains no hydrocarbons.

Another smaller stock, Bodisen Biotech, also highlighted the risks of investing in biotech issues. The company only listed in early February and traded as high as 1,048p towards the end of March. Negative press comment in the United States, where the company has its main listing on the American Stock Exchange, sent the shares crashing yesterday, 261p lower to 569p, a fall of 31.5 per cent, before a late rally saw the stock claw back some of its losses to close 210p lower at 620p.

The biggest small cap disaster of the day was Lennox Holdings, which returned to the market after suspension on 21 October. The company's Spanish business turned out to have a £1.7m cumulative under-declaration of Spanish corporation tax spread over several years prior to the Lennox acquisition in October 2004. The shares closed at 5.5p, a fall of 26.5p, 82.8 per cent from the pre-suspension price.

Finally, look out for Velti, a mobile telecommunications application provider, which starts trading today after a placing by Oriel Securities at 100p. The placing was four-times oversubscribed.