Market Report: Internet challenge sends ITV shares plummeting

ITV's tough return to life as a blue-chip company continued last night as fears were raised about the threat facing the broadcaster from viewers watching shows on the internet through their televisions.

This week has been the group's first on the top-tier index since 2008, yet it has fallen every day. Yesterday was its worst performance yet, closing 4.35p behind at 80.35p, after Jefferies cut its rating to "underperform".

Nick Bell, an analyst at the broker, downgraded the group in a note on the sector in which he warned that "the plethora of consumer devices to connect TVs to the internet is set to change the broadcast landscape as much as digital TV did".

Saying he was concerned about longer-term trends despite the recent advertising recovery, Mr Bell predicted a "very rapid growth in the penetration of internet-connected TVs over the next few years". The risks this brings, he said, include "continued viewer fragmentation, global competitors entering traditionally national markets, and even a longer-term risk of disintermediation."

On ITV specifically, the analyst predicted low consumer confidence would knock its advertising, as would the effect of commodity price inflation on the "ad spend of companies in the all-important retail and food sectors".

There were also warning sounds from Nomura, whose analysts said the "latest indications suggest May will be negative for TV advertising". Yet, despite forecasting a short-term retreat in ITV's share price "if the TV advertising market is losing momentum", they maintained its "buy" recommendation and said the outlook for 2012 looks impressive.

Overall, the FTSE 100 ticked up 33.17 points to 5,795.88 after a late rally, although initially the Budget prompted few major movements on the index.

On the FTSE 250, however, Enquest plummeted 19.7p to 137.6p after the oil and gas groups operating in the UK were told they were facing a tax rise. Others affected included Premier Oil, 79p behind at 1,911p, as well as Encore Oil and Nautical Petroleum, which lost 6p to 108.75p and 44.5p to 399.75p respectively on the Alternative Investment Market.

George Osborne also introduced plans to help first-time buyers. And although the move was expected, Redrow, which was up 4.1p to 129.7p, Barratt Developments, up 2.9p to 109.2p, and Taylor Wimpey, up 1.04p to 41.96p, all finished stronger.

To compensate for the corporation tax cut, the Chancellor announced an increase in the bank levy, a move that was attacked by the British Bankers Association. Lloyds Banking Group slid 0.92p to 60.24p and Royal Bank of Scotland was knocked back 0.37p to 41.42p, with sentiment also damaged by the vote in Portugal on the country's proposed austerity measures.

J Sainsbury closed in last place, retreating 19p to 335.3p, as the market reacted in disappointment to the supermarket's fourth-quarter trading statement.

Its sales over the period rose only 1 per cent, down from 3.6 per cent the three months before, and the group's chief executive, Justin King, predicted consumer spending would remain under pressure.

Evolution Securities said the numbers "are starting to show the impact of the perfect storm on the sector", and Wm Morrison eased back 1.9p at 274.4p, although Tesco increased 1.15p to 380.15p.

There was also vague speculation, played down by traders, that Sainsbury's shareholder Qatar Holdings is keen for it to make a bid for Marks & Spencer. The high-street institution moved up 5p to 345.5p, helped on the read-across by impressive annual numbers from the Spanish group Inditex, the world's largest clothing retailer.

It was a strong session for the mining sector, and ENRC advanced 31p to 929.5p after posting a full-year underlying profit which was more than double what it managed to achieve over the previous 12 months. Another miner benefiting from strong figures was Ferrexpo – 18.7p better off at 421.2p – as its pre-tax profits jumped to $498m from $81m in 2009.

Soco was driven forwards 10.7p to 371.7p as its update impressed, although Numis Securities played down the bid rumours which have surrounded it recently, saying it expects "a potential acquirer to wait for first oil from [its TGT development in Vietnam]... before stepping up to the plate".

Another company being considered for a takeover was Meggitt, with UBS saying it "continues to be the most attractive merger and acquisition candidate in the sector". Yet the aeroplane parts supplier edged up just 0.6p to 334.3p despite the broker reiterating its "buy" advice.

On the fledgling index, SkyePharma powered up 6.63p to 44.5p following the release of the drug developer's preliminary results. The group posted a return to pre-tax profit, although it warned that the threat to its royalties from generic products would increase in the coming months.