US Stocks Fall Amid Sector Declines; Gold Holds Steady as Traders Eye Key Economic Data | Daily Market Analysis

Key events:

• USA - S&P Global US Manufacturing PMI (Jun)
• USA - ISM Manufacturing PMI (Jun)
• USA - ISM Manufacturing Prices (Jun)

US stocks fell after Friday's close, with significant declines in the Consumer Goods, Utilities, and Consumer Services sectors dragging shares down.

At the end of the trading session on the NYSE, the Dow Jones Industrial Average dropped by 0.12%, the S&P 500 index decreased by 0.41%, and the NASDAQ Composite index fell by 0.76%.

During Monday's Asian session, the NZD/USD pair experienced some dip-buying, building on Friday's slight recovery from the mid-0.6000s, its lowest point since mid-May. Spot prices are now around the 0.6100 mark, supported by a modest weakness in the US Dollar. However, there is a lack of strong bullish sentiment due to uncertainty over the Federal Reserve's rate-cut plans.

The US PCE Price Index released on Friday confirmed a disinflationary trend, aligning with the CPI and PPI for May. This data strengthened market expectations that the Fed will begin cutting interest rates at the September policy meeting, keeping USD bulls on the defensive. Additionally, a positive tone in US equity futures undermines the safe-haven appeal of the USD, supporting the NZD/USD pair.

Despite this, the Federal Reserve's more hawkish stance at the June policy meeting, predicting only one interest rate cut in 2024, alongside President Joe Biden's challenging debate with his Republican opponent, increased the likelihood of a Trump presidency. This raises concerns that aggressive tariffs under Trump could drive inflation and higher rates, which would support elevated US Treasury bond yields and limit USD losses.

Additionally, expectations that the Reserve Bank of New Zealand might cut rates sooner than anticipated, combined with economic issues in China, could deter bullish traders from placing new bets on the NZD/USD pair. Official data released on Sunday showed a decline in China's manufacturing activity for the second consecutive month in June, with services activity hitting a five-month low. This warrants caution before confirming a near-term bottom for spot prices.

The Japanese Yen remains weak on Monday, hovering near its lowest level of 161.28 since 1986. However, its decline appears limited due to positive business confidence data from Japan, which has boosted market sentiment. Additionally, speculation about potential intervention by Japanese authorities is providing support for the JPY. Japan's Tankan Large Manufacturing Index increased to 13 in the second quarter, up from the previous reading of 11. This marks the highest level in two years, reflecting an improving economic outlook. Meanwhile, Japan's Jibun Bank Manufacturing PMI for June was revised slightly lower to 50 from a preliminary reading of 50.1, but it remained in expansion territory for the second consecutive month.

The Australian Dollar may see limited downside as China's Caixin Manufacturing PMI rose to 51.8 in June, exceeding expectations of a decline to 51.2 from May's 51.7. Changes in the Chinese economy can significantly impact the Australian market due to the close trade relationship between the two nations. However, the AUD faces pressure as investor sentiment soured following data indicating that Australia's June manufacturing PMI contracted at its fastest rate since May 2020. Market attention is now focused on the upcoming Reserve Bank of Australia's policy meeting minutes on Tuesday for insights into the monetary policy direction.

Gold prices are steady near $2,325 during Asian trading hours on Monday, maintaining Friday's range. Despite the US PCE inflation data weakening the US Dollar, gold prices have not capitalized on this, as traders are cautious ahead of a significant week. Gold traders are hesitant to take new positions ahead of key events, including US Federal Reserve Chair Jerome Powell's speech at the European Central Bank forum on Tuesday and the critical Nonfarm Payrolls data on Friday.

Gold prices could face downside risks if the USD strengthens due to a profit-taking rally. However, any losses might be limited by stronger-than-expected China's Caixin Manufacturing PMI data and renewed expectations of a Fed rate cut as early as September. Additionally, if the Euro extends its gains during European trading hours, it could further pressure the USD downwards, providing a boost to gold prices.

Looking ahead, traders will focus on key US macroeconomic releases at the beginning of the new month, starting with the ISM Manufacturing PMI for short-term opportunities during the North American session. The main attention will be on the closely-watched US monthly employment data, known as the Nonfarm Payrolls report, due on Friday.