ITV was among the fallers as the stock market paused for breath, ending a six-session winning streak last night.
The FTSE 250-listed company's shares closed 3.7 per cent lower after JP Morgan sparked a round of profit-taking, telling investors that in light of the recent upward run, the risk profile of cyclical plays was no longer attractive relative to the more defensive names in the media sector.
In the year to date, for example, defensives are down by more than 20 per cent relative to the MSCI Europe index, while cyclicals are more than 17 per cent stronger. That strength is reflected in the weighting of media cyclicals in terms of market capitalisation, which have grown to about 40 per cent of the sector from 35 per cent at the end of last year, JP Morgan said.
"We think there is less clarity on which media sub-sectors will outperform from here, as we believe the market has priced in most of the 2010-11 revenue-earnings growth for [the cyclical stocks]," the broker said in a European sector review.
It added that there was also a short-term risk that financial markets would react negatively if advertising revenue growth for the final quarter of this year did not improve to somewhere in between minus 5 per cent to 0 per cent, compared to the minus 15 per cent to minus 10 per cent range seen in the first half.
Unsettled by JP Morgan's views, ITV closed down 1.79p at 46.61p. Traders also spoke of concern about the broadcaster's search for a new chief executive, with reports highlighting a disagreement over pay between the ITV board and its preferred candidate, the former BSkyB boss Tony Ball.
Overall, the FTSE 100 touched a session low of 5,107.71 before recovering to 5,134.36, a fall 38.53 points, as investors moved to book profits from the recent rally. The mid-cap FTSE 250 index was similarly unsettled, closing almost 1 per cent, or 86.28 points, weaker at 9,220.65.
David Jones, chief market strategist at the spread-betting firm IG Index, said the retreat was expected because investors were taking "a step back to re-evaluate the economic landscape". He added: "With relatively little in the way of economic news on the horizon, much of the week's focus is on the G20 summit on Thursday, and it is possible we will see a choppy few days ahead for the markets."
Royal Bank of Scotland, down 5.2 per cent, or 2.9p, at 53.4p, was the weakest of the blue chips as traders sold out on reports of a possible cash call. The state-backed bank was said to be gauging investor support for a share issue, with a figure of up to £4bn being mentioned. The wider sector was also weak, with Lloyds declining to 107.6p, down almost 3 per cent, or 3.07p, and Barclays falling back to 370p, down 1 per cent, or 3.65p.
Profit-taking was in evidence across the mining sector, with the likes of Fresnillo, down 28.5p at 753.5p, and Lonmin, down 45p at 1699p, relaxing as sellers outnumbered buyers. Kazakhmys was 3.3 per cent or 37p weaker at 1087p as Citigroup's decision to move the stock from "buy" to "hold" overshadowed some words of support from Goldman Sachs, which raised its target price from 1500p to 1734p. Of the two London-listed Kazak miners, Citi said it was keener on the Eurasian Natural Resources Corporation, which was 18p lighter at 874p.
"ENRC is likely to be an ongoing beneficiary of the cost pressures facing the [South African] ferrochrome industry and the balance sheet provides ample flexibility to pursue growth," the broker said, switching its stance on the shares from "hold" to "buy".
On the upside, Marks & Spencer stood out, rising by 1.6 per cent, or 5.9p, to 374.4p after Société Générale weighed in, raising its target price for the retailer's stock from 445p to 500p. The broker also increased its pre-tax profits forecast for for M&S for the current year by 10 per cent, from £596m to £654m.
On the second tier, Bank of America Merrill Lynch abandoned its "neutral" stance on the commercial property group Great Portland Estates, which fell by 2.5 per cent, or 7p, to 273.4p. Setting an "underperform" rating and maintaining a 265p target price on the stock, the broker attributed its move to the twin risks of Great Portland "not being able to deploy the rights proceeds in the timeframe set out and having to 'pay-up' for assets".
Merrill also weighed in on the recent announcement of Robert Noel's resignation from the board, saying that his departure as investment director "cannot be ignored and is negative". "He was instrumental in assembling and negotiating a significant portion of Great Portland's deals and joint ventures," it added.
Dairy Crest, up 12.3p, or 3.4 per cent, at 374.3p, went the other way after Numis raised its target price for the food producer's stock 410p from 375p. Evolution also weighed in, upgrading Dairy Crest from "neutral" to "buy".
"Positive earnings momentum and a 7 per cent underperformance relative to the sector in the last three months has led to Dairy Crest becoming the third most-attractive stock in our recent forced ranking of 4 four companies in the consumer staples sector," Evolution said.Reuse content