BSkyB reception deteriorates

There was no respite for BSkyB shareholders yesterday as the satellite broadcaster took its losses since last Wednesday's disastrous strategy presentation and fourth-quarter figures to 22%.

The shares - 599p before chief executive James Murdoch outlined plans to spend more on marketing and increase capital expenditure by £450m - fell a further 11p to 466p after a leading City investment bank said they were unlikely to bounce back this year.

Dutch broker ABN Amro says it will take some time for Sky's management to regain investor confidence.

It says the City will be unable to make a judgment on the success or otherwise of Sky's new marketing strategy until February at the earliest - by which time the company will have published two sets of quarterly subscriber figures.

Moreover, traders note that Sky will not be able to launch a programme to buy back 5% of its shares until it has received shareholder backing at the annual meeting in November.

Elsewhere in the media sector, ITV firmed 1.75p to 98.5p amid speculation that the broadcaster will announce, alongside next month's half-year figures, plans to sell non-core businesses worth about £500m and return the proceeds to shareholders by way of a special dividend.

Assets said to be on the block include Carlton Screen Advertising, Granada Learning, Carlton Books and the Moving Picture Company.

In the wider market, leading shares closed higher despite a weak showing from Wall Street, which was under pressure following a profits warning from the computer and printer maker Hewlett-Packard.

Lifted by strong performances from a handful of defensive stocks, including AstraZeneca, up 46p to £24.20, and Severn Trent, 23p better at 855p, the final scores showed the FTSE 100 up 15.9 points at 4,328.1.

The FTSE 250 rose 11.2 points to 5,869.7, while the FTSE Small Cap index eased 3 points to 2,432.7. Trading volumes were once again abysmal with about 2bn shares changing hands. In the bond market, gilts closed higher. The benchmark 10-year gilt ended at 100.460, yielding 4.941%.

Back in the equity market, Shell was marked 5.25p higher at 395p, excited by reports that it has reached agreement with its Dutch sister company, Royal Dutch, to unify its two boards. However, analysts think talk that the two companies might go one step further and merge is likely to be wide of the mark. According to German bank Dresdner Kleinwort Wasserstein, such a deal, if incorporated in Holland, would destroy about $4bn (£2.2bn) of value because of the loss of a UK tax credit.

Lower down the market,Hit Entertainment, the media group behind Bob the Builder and Thomas the Tank Engine, gained 7p to 223p despite Wednesday's late news that Toys R Us had taken a $150m hit in order to liquidate unwanted stock.

Toys R Us is thought to account for about 10% of Hit's US home entertainment revenues, and the fact that the shares managed to close higher in the face of that news owed much to joint house broker UBS, which moved swiftly to repeat its buy recommendation to nervous clients.

The Swiss investment bank believes that Hit's merchandise is unlikely to be affected by the markdowns and that the company remains on track to make an announcement about a digital TV channel in the US at or before October's half-year results.

Carphone Warehouse, up 6.5p to 129p, was another of the day's top performing mid-cap stocks after the company's joint broker, Deutsche Bank, upgraded to buy, citing recent share price weakness.

Carphone shares have fallen 17% since the start of July and hit their lowest level of the year on Wednesday. Deutsche analyst Geoff Ruddell reckons the fall has created an excellent buying opportunity, given that there is no fundamental reason for the weakness. Indeed, it is only a fortnight since the company issued an upbeat trading statement. Moreover, he believes TalkTalk, Carphone's fixed-line telecoms business, is continuing to grow strongly.

Meggitt, the defence and electronics group, climbed 7.25p to 215.25p after UBS slapped a buy rating on the stock, also citing recent under-performance.

UBS believes the recent weakness in the Meggitt share price - it was trading at 220p in late July - has been triggered by shareholders selling stock in order to subscribe for the company's £180m rights issue. With the rights payment due next week, analyst Colin Crook expects the selling pressure to subside.

Meggitt plans to use the money raised to help pay for the acquisition of the design and manufacturing division of Dunlop Standard Aerospace.

Alfred McAlpine rose 12p to 256p amid talk that the construction group had been back in the market buying more stock.

Among the smaller companies, bookseller Ottakar's eased 9.5p to 365.5p, hit by profit-taking and concerns that the stock is overvalued.

Finally, keep an eye on Air Music & Media, the Aim-listed supplier of budget CDs and DVDs, which was suspended last month pending news of a deal.

Dealers believe the company is close to finalising a fund-raising through the broker Seymour Pierce, the proceeds of which will be used for a reverse takeover.

Metal firms rise on rate cut

Anglo-American was the biggest riser in the FTSE 100 and Lonmin one of the best performers in the FTSE 250 yesterday after South Africa's rand fell 4% against the dollar following a half-point rate cut by the country's central bank.

Anglo, best known for its interests in gold, and Lonmin, a platinum specialist, have the bulk of their operations in South Africa and a fall in the rand is good news for both because it helps lower their production costs.

That was reflected in yesterday's share price movements. Anglo shares advanced 46p to £12.01 - their best level since April - while Lonmin added 64p to £10.66.

The rand fell about 26 cents to 6.475 against the dollar. South Africa's reserve bank cited an improved inflation outlook as the reason for cutting rates to 7.5%.