Market Report: Merrill pulls the plug on radio's GCap Media

Things have been grim in the radio advertising market for a while, and they could get worse before they get better for GCap Media, down 8.5p to 200.75p, after the broker Merrill Lynch published a very bearish research note on the company.

The US investment bank believes that the group could be in danger of breaching its banking covenants, and that second quarter listening figures at its Capital Radio and Classic FM franchises were even worse than expected. Should the group breach its banking agreements, the share price could have significantly further to go on the downside.

Merrill also believes there is little chance of a takeover bid in the current climate. The shares are given some support by the dividend yield but if the group is forced to refinance, the dividend is sure to be cut.

The inter-dealer broker Icap was top of the blue chip leaderboard after its US rival GFI raised its third quarter guidance and made a small acquisition. According to one trader, many investors make the mistake of assuming Icap's business tracks the equity markets, but the group conducts most of its business in corporate bonds, treasuries, foreign exchange and derivatives. The shares jumped 16p to close at 466p, still almost 19 per cent below the high for the year.

The fashion retailer Next was also in demand, up 63p to 1,728p, on the back of vague bid talk. The word in the market is that a private equity house is mulling a 2,000p per share offer for the group, valuing the company at £4.9bn, including £432m of debt. There was little word on who the bidder could be, but the usual buyout fund names did the rounds, including Apax Partners, Permira and CVC Capital Partners.

Profit taking on the commodities futures markets meant a bad day for investors in mining stocks. Worst hit were the copper miners Vedanta Resources and Kazakhmys, down 41p to 1,321p and 9.75p to 461p respectively, in line with copper futures falling $200 per tonne to $7,820. Gold also declined $4.60 an ounce to $612.70, encouraging another bout of profit taking at Randgold, 64p weaker at 1,203p.

Brokers seem to be divided on AstraZeneca, the pharmaceuticals giant. Deutsche Bank upped its price target for the group to 3,760p on Thursday and maintained its "sector top pick" advice. Yesterday, Citigroup downgraded the shares from "buy" to " hold" on valuation grounds, although it did maintain its 3,600p target price. The shares dropped 45p to 3,300p.

There was some respite from two days of heavy losses as investors did a bit of bargain hunting and the index heavyweights BP, 7p firmer at 591p, and Shell, 5p better at 1,852p, found some buying support. The FTSE 100 index closed the week 21.2 higher at 5879.3.

Second line oil stocks were out of favour, with JKX Oil & Gas leading the fallers with an 11.5p drop to 277p. Market makers put the falls down to a bout of profit taking and switching back into large cap oils on reports that BP's Prudhoe Bay field could be back to full operating capacity as soon as November. Elsewhere in the mid caps, Venture Production shed 31.5p to 742p and Premier Oil, bid significantly better this week on Shell takeover speculation, fell 36p to 1,010p. Soco International bucked the mid cap malaise, adding 68p to 1,420p, as Merrill Lynch upped its target price to 1,715p.

Any investor brave enough to have taken a punt on internet gambling stocks on Thursday will have been disappointed by the lack of any real bounce yesterday. 888 Holdings, due to report first half earnings next week, added 1.5p to 145.5p and PartyGaming fell 0.25p to 105.5p. PartyGaming's excellent first half numbers were completely overshadowed on Thursday by the arrest of Peter Dicks, chairman of rival Sportingbet, whose shares remain suspended.

Xtract Energy continued to attract good support after a bullish update on Wednesday. The shares closed at an all-time high of 10.37p, up 2.62p. Brokers said that until the update, retail investors had steered clear of the stock, but that much of yesterday's 2.8 million volume was down to retail buyers.

Monterrico Metals dipped 5p to close at 181.5p ahead of next week's results, although many traders are expecting an upbeat assessment of the group's prospects. Recent changes to the group's board of directors and within the Peruvian cabinet have encouraged investors to believe that the company's Rio Blanco copper project - thought to be the one of the world's largest copper deposits - could be back on track.