Signs that infrastructure funds are still ready to make big deals despite the turmoil in credit markets helped London stocks to fight back yesterday, led by the water companies Severn Trent and Kelda.

Royal Bank of Scotland is auctioning Southern Water and the word yesterday was that there had been a flurry of interest from funds. That, in turn, helped to drive a recovery of the listed companies. Kelda closed up 26p at 852p and Severn Trent rose 37p to £13.42, making them Nos 2 and 3 on the large cap leaderboard. Pennon, a smaller rival, closed up 18p at 575p.

The FTSE 100, having opened down by as much as 45.7 points after falls on Wall Street and in Asia, closed up 30 points at 6,132.2. Positive trading results from blue chips such as Whitbread, the biggest riser, up 54p to £16.12, and Segro, the former Slough Estates, up 10p to 524p, also helped to lift sentiment.

“It’s hard to find sellers now,” one trader said. Many have been eyeing JSainsbury, up 9p at 540p, amid fears that Delta Two’s takeover bid would not materialise, but sellers of the stock - one is said to have sold 12 million of its 38 million shares at 515p in case the deal collapsed - have decided to stop. “The bid is going ahead,” one dealer said.

Similarly, Cadbury Schweppes, which had been hit by talk that the disposal of its drinks business may be affected, gained 14p to 576½p. Northern Rock, which has become a benchmark of credit crunch fears, was up 8½p at 720½p. Standard Life rose 6p to 290½p after an upgrade by Morgan Stanley and a reshuffle of its private equity unit. Barclaysrecovered 11p to 600p and British Land was up 24p to £12.75 ahead of interim results today.

Next, the clothing retailer, rose 35p to £19.04 after JPMorgan upgraded it to “overweight”, raising its price target to £21.60 from £20.52. It said that Next had improved its designs, particularly for the 25-to-34 age group.

JPMorgan also began coverage of Debenhams, up 1p at 120½p, with an “underweight” rating and a 105p target price, saying that its stores were underinvested and trading figures on September 18 could be grim.

Among the fallers, Persimmon stood out, off 9p at £11.55, as it went ex-dividend. Barratt Developments, another housebuilder, fell 6p to 905p as housing market worries continued to weigh.

Antofagasta, up 8½p to 692p, did not help sentiment among mining stocks even though its results beat expectations. It said that volatility in the copper price could continue over the next few months, particularly if the American economy is hurt. Xstrata was down 20p at £28.10.

Standard Charteredlost 6p to close at £14.64. It has been dogged by fears over the performance of Whistlejacket Capital, the asset-backed fund that it manages. Tesco fell 1½p to 412p even though Credit Suisse reiterated its 500p price target, saying that operations in China, Turkey and Malaysia could sustain its growth momentum.

— New York: Shares on Wall Street rebounded as investors, growing more optimistic about chances for an interest rate cut, sought bargains after the big tumble of the previous session. The Dow Jones industrial average closed up 247.50 points at 13,289.30.

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