Media stocks such as Pearson and Granada climbed today, reflecting a rising confidence that the sector is on the path to recovery following this year's slump in earnings and share prices.
Analysts said that confidence was underpinned by better prospects for the US and global economy, rather than an improvement in news flow from companies, which had remained mixed.
"There seems to be a lot of confidence the US stimulus package can avert a prolonged downturn," said Mr Simon Baker, media analyst at SG Securities.
In the FTSE 250, radio group Chrysalis jumped 12 per cent, exhibitions company Informa was up eight per cent and broadcaster Carlton Communications was up 5.5 per cent. Most other stocks in the sector were up on the day.
The FTSE media and photography sub-index has rallied over 1,000 points, or 28 per cent, since falling to a low of 3,538 points at the start of October.
Share prices slumped after the September 11th attacks on the United States and compounded concern about a deep recession.
"The sector's enjoying a strong rally from the lows of post-September 11th, when some shares almost had half their price eroded over the space of a few weeks," SG's Baker said.
Other analysts agreed news of more interest rate cuts had raised hopes that media stocks will recover next year.
Companies have struggled as advertising income has slumped, the technology downturn has wiped out investments in dot-com projects, and exhibitions have been cancelled.
"Lots of investors appear to be taking the view that we're going to come out of the trough quicker than expected, so it will be a V-shaped recovery," said Ms Grace Fan, media analyst at Bank of America.
But Ms Fan said anticipation of the recovery could be premature, as more downgrades could still emerge for 2002 earnings, and price to earnings valuations still make the European media sector more expensive than the overall market.
Nevertheless, several dealers said an upgrade on the whole media sector by Lehman Brothers earlier this week had helped focus attention on the prospects for recovery.
Lehman raised its exposure to the European media sector to "overweight" from "neutral," as it said the sector now had attractive valuations.