* Shares in BSkyB dip in and out of negative territory
* Panmure cuts BSkyB share target, sees risks to Murdoch deal
* Shares in rivals up, Trinity Mirror soars 10 pct
By Paul Hoskins
LONDON, July 8 (Reuters) - BSkyB stock wavered as uncertainty persisted over whether Rupert Murdoch's decision to shut the News of the World newspaper in response to a hacking scandal would help his battle to take full control of the British satellite broadcaster.
Shares in the owners of rival publications such as the Sunday Mirror and the Sunday Mail jumped, however, as analysts predicted they would be quick to hoover up readers and advertisers left behind by the demise of the News of the World.
Analysts noted that the direct financial impact on Murdoch's British operations would be relatively small and from the perspective of the overall News Corp group would hardly register.
"I'm guessing it (News of the World) does 50-ish million pounds of revenue. But Sky is 8 billion of revenue, a billion of profit. You make a very public and obvious scapegoat of an influential but very small profit centre," Alex DeGroote, media analyst at brokerage Panmure Gordon said.
With advertisers quitting the News of the World in their droves, analysts said closing the 168-year-old paper had limited the immediate potential for contagion to spread to other Murdoch titles in the UK such as The Times and The Sun.
"The stain on the brand was going to be permanent, and this is a perfectly sensible decision," said Claire Enders, head of media consultancy Enders Analysis.
The burning issues of alleged hacking and police bribery are unlikely to go away soon, however, and News Corp, which also owns the Wall Street Journal in the United States, still has a tough damage limitation exercise on its hands.
"It's very big and unexpected. But I'm not sure it's going to solve the problem while the chief executive and ex-editor of the paper in some of its darkest days is still the chief executive of the company," said media consultant Steve Hewlett.
Some analysts also doubt whether closing the paper will do much to lift the regulatory and political cloud hanging over Murdoch's attempts to take full control of BSkyB.
Shares in the satellite broadcaster, which had fallen 5 percent since the start of the week, were down another 0.5 percent at 808 pence by 0756 GMT.
"I don't see how this deal can go ahead now," said DeGroote while warning the speed at which events are unfolding meant investors were "into totally uncharted territory".
He cut his price target on BSkyB shares to 730 pence from 750 pence on what he judged to be a higher risk that the proposed deal with Murdoch's News Corp would collapse.
However, other analysts noted that the scandal had prompted deluge of responses to a consultation on the future of BSkyB which will take months to process, allowing the government to avoid making a final decision while the story rages.
While the government has repeatedly said the two issues are not linked, it would have been very difficult for it to approve the deal in the current climate.
News Corp's pain should also be good commercial news for rivals in the UK Sunday newspaper market.
"In the short term the move provides an opportunity for market share gains of both advertisers and circulation for other Sunday titles," analysts at Numis Securities wrote in a note to clients.
Numis said it believed the Mail on Sunday was well placed to win both readers and advertisers and shares in its owner Daily Mail & General Trust (DMGOa.L) were up 3 percent.
Shares in Trinity Mirror , which owns the Sunday Mirror and the People newspapers soared 10 percent.
"We believe the biggest beneficiary will be the Sunday Mirror/People given it competes directly against NoW (News of the World) in the tabloid segment of the market," analysts at UBS wrote.
"The Mail on Sunday will also benefit in our view, but to a lesser degree given its mid-market position."
Britain's biggest wholesaler of newspapers, magazines and books Smiths News said it anticipated "minimal financial impact" from the closure of the News of the World, predicting readers would simply switch to other titles.
"Smiths News expects that a combination of significant buyer substitution and the group's flexible cost base will result in minimal financial impact," it said.
Additonal reporting by Paul Sandle and Georgina Prodhan; editing by Kate Holton