It has been a bad time for media stocks, which have not escaped the economic squeeze that has taken its toll on, for example, builders and property groups. Investors have been selling out, scared away by fears of a slump in advertising spending.

Yesterday, however, offered a rare, and welcome, boost to flagging sentiment as analysts at Goldman Sachs said that some of the sell-offs had been overdone.

BSkyB, the satellite broadcaster, was singled out for the American investment bank’s “conviction buy” list. Goldman said that although it expected the advertising environment to “deteriorate markedly” over the next six months and into 2009, BSkyB, in which News Corporation, parent company of The Times, has a 39.1 per cent stake, had limited exposure to this potential weakness, as advertising accounted for only 8 per cent of its revenues. The bank expects BSkyB to outperform the wider sector.

Goldman upgraded Trinity Mirror, the publisher of the Daily Mirror newspaper, to “buy” from “sell”, noting that its national assets “might prove attractive to potential bidders at the current low valuation”. It also raised its target price on the shares to 139p, from 85p. Moreover, it said that the valuation gap between Trinity and Johnston Press, which it downgraded to “sell” from “neutral”, was one of the highest in the sector. ITV was also upgraded, to “neutral” from “sell”, with Goldman noting that shares had fallen more than 36 per cent since it added the stock to its “sell” list in May.

However, early gains for the media stocks were pared back later in the session after Carat, the media communications unit of Aegis Group and a respected industry forecaster, reduced its British advertising spending growth forecasts to 2.5 per cent, from 4.3 per cent previously, for 2008 and to 2.2 per cent, from 4.4 per cent, for 2009. BSkyB closed 6p higher at 456p, Trinity Mirror rose 3½p to 103p and ITV slipped 0.3p to 42.1p. Johnston Press fell 3½p to 47½p as it scrapped its dividend after posting a first-half pretax loss and giving warning that its performance for the rest of the year would reflect what it called difficult market conditions.

Overall, the FTSE 100 index rose 57.40 points to 5,528.10 as gains for commodity stocks offset losses for property and consumer-focused companies. A good start on Wall Street also helped to keep London positive.

The oil sector was in focus, with Tullow Oil, up 23½p to 817p, and Petrofac, the energy services group, up 37p to 629½p, reporting strong first-half earnings and with the oil price rising above $118 amid fears that Tropical Storm Gustav posed a risk to energy facilities in the United States.

Enterprise Inns was the biggest faller, losing 14p to 307½p, after analysts at Cazenove downgraded the pubs group to “underperform” from “neutral”, citing ongoing weakness in the beer market.

Debenhams rose ½p to 48p after Altium upgraded it to “buy”, noting that there was potential for growth and that the stock appeared to have been oversold.

New York: There was a rally in the energy sector on Wall Street, as oil rose for the third straight day, and in financial shares. The Dow Jones industrial average was up 89.60 points at 11,502.50 at the close.

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