Dow Jones and FTSE swings between flat and negative as traders

US markets and the FTSE 100 swung between losses of 0.5% and flat territory on Monday as investors continued to position themselves for a potentially volatile next 48 hours as Republicans and Democrats struggle to agree on terms to raise the US debt ceiling.

A stronger gold price, which subsequently hit a new all-time record high of $1622, along with rallies in other safe haven asset plays such as pharmaceutical and tobacco firms, indicates that investors were positioning themselves as US debt talks hit crunch time by downsizing the amount of risky assets they had added to their portfolios last week as stock markets rebounded. Indeed, demand for pharmaceutical firms was firmly supported not just by investors recycling risk, but also by a positive note on GlaxoSmithKline by Bank of America/Merrill Lynch ahead of its results tomorrow. The US bank upgraded its price target on the pharmaceutical giant’s shares by 7% to £15.

We have seen investors take profits in banking stocks, particularly those banks such as Barclays and Lloyds, whose share prices surged last week as the EU agreed upon the draft terms of a second bailout for Greece and other additional measures to prevent contagion within the eurozone. Barclays and Lloyds were the top two fallers in the FTSE 100 list of stocks today on profit taking, falling 4% into the close, whilst more severe falls were seen in Italian banks, with the Italian Mib the worst performing index in Europe on the day, down 2.4%.

Dixons the worst mid-cap performer after UBS note
A negative note from UBS on Dixon’s Retail Group was enough to send the retailer’s share price heavily lower on the day, losing near 6% into the close and making it the worst performing mid-cap equity in London. The bank advised that it expects the second half of the year to remain tough for the retailer and cut its full year pre-tax profit forecasts by 18% for 2012 to £70 million. Dixon’s share price has been in a consolidation pattern for the past month and today’s losses pushes its share price closer to testing near term support levels of 15p.