Leading shares shrugged off early weakness and recovered much of the ground lost on Wednesday.

The FTSE 100 index pushed back above the 5300 level.

Dealers said the lacklustre start reflected thin trading conditions and unsettled continental equity markets, but hopes for a firm start to Wall Street and prospects for a Bank of England rate provided some inspiration.

The FTSE 100 was up 25.9 at 5319.8, 15 points, off a low of 5276.1.

One of the key features was a warning from water utilities regulator Ian Byatt that he could call for a 15% to 20% cut in average household bills.

Severn Trent dropped 2% and United Utilities slipped 1.8%.

Meanwhile, oil exploration groups Lasmo and Enterprise Oil were knocked back by a negative research note from Morgan Stanley Dean Witter. The shares fell 5% and 3.8% respectively.

The telecoms sector was in favour agains on talk that there would be a huge boom in new signings to mobile phones in the run-up to Christmas.

Vodafone gained 5.6% while Orange was up just under 4%.

Glass maker Pilkington gained 4% after beating market forecasts with a £66m first half pre-tax profit.

Rank added 4% following the resignation of chief executive Andrew Teare.