Gains by water and gas companies helped lift the FTSE 100 Index into positive territory yesterday and narrowed losses that saw it dip towards the 4900 level early on.

Broker upgrades left a string of utility firms at the top of the Footsie risers board and lifted the index 3.8 points higher at 4937.3.

Although the index had slipped 25 points lower at midday, a more positive start to trading across the Atlantic also helped lift spirits in London.

By the end of the day in London, the Dow Jones Industrial Average stood about 20 points higher as jitters ahead of a decision on US interest rates eased slightly.

At home, unchanged inflation data reduced the pressure on the Bank of England to raise interest rates and left shares in a more favourable light.

Severn Trent was the day's biggest climber after an upgrade from JP Morgan, advancing two per cent or 19.5p to 924.5p.

And an upbeat note on UK gas companies from Deutsche Bank helped lift a string of stocks into the top Footsie risers, including Scottish & Southern Energy up 13p to 892p, Centrica advancing 3.25p to 226p and Scottish Power up 5.5p to 412.25p.

Retailers were also trying to lighten the mood as they recovered ground lost in the wake of a profits warning from photographic specialist Jessops yesterday.

Dixons added more than one per cent, up 1.75p to 151.75p and Boots lifted 8p to 622.5p. But outside the top flight, Jessops fell deeper into the red, losing another seven per cent or 8p to 99p.

Mobile phone group O2 was weighing heavily on the market after revealing a maximum hit of £45m from up to 500 job cuts.

The group was the heaviest top flight faller, down nearly five per cent or 6p to 117p as it flagged that revenues growth would slow to mid-single digits in its next financial year.

In the FTSE 250 Index, budget airline easyJet climbed 14.5p to 212.75p after forecasting first-half operating margins in line with last year despite high fuel prices.

And computer games maker Eidos soared 28 per cent or 12.5p to 57.25p as SCi Entertainment unveiled a takeover offer to rival the £71m bid from a private equity firm involving U2 frontman Bono, which was announced hours earlier.

Cable company Telewest cheered two per cent or 18p to 880p after saying customers choosing to take all three of its services helped drive a 14 per cent hike in annual underlying earnings.

Plans by the company behind Revolution vodka bars to double its number of outlets also went down well with investors. Shares in Inventive Leisure rose 2p to 86.5p after it said there was room for a further 40 to 60 of its bars in the UK, particularly in London.

The highest Footsie risers were Severn Trent up 19.5p to 924.5p, Capita rising 6.5p to 377.5p, Reuters up 7p to 410p and Carnival adding 48p to 2969p.

The heaviest fallers were O2, Schroders, Schroders NV and Amvescap.