Key takeaways:

• US retail stocks will hand down earnings over the coming days

The ASX faces a cautious start to the week as investors digest a six-month low for US consumer sentiment, and a looming battle over the debt ceiling.

Economic Calendar and News

In the US, politicians will convene to discuss the prospect of raising the US$31 trillion debt ceiling. 

While President Biden will be hoping for a quick deal, Republicans are expected to put pressure on the government to curtail its spending, something that has widely been recognised as a contributing factor towards elevated inflation. 

A deal, while not likely to be reached without political wrangling, would help policymakers avoid a US default, which has never happened before. 

Elsewhere, the Census Bureau will report on US retail sales from April. Forecasts suggest sales likely grew by 0.7%, which would mark a turnaround compared with the 0.6% contraction seen in March. On a yearly basis, however, expectations for growth of 1.4% signals a pessimistic outlook, with that figure being the slowest annual growth since the start of the pandemic.

On Australian soil, look out for fresh data on jobs and wages. These figures will form a crucial input in the Reserve Bank of Australia assessment of monetary policy.

Economists expect national wages grew 3.6% in the first quarter of the year versus 12 months ago, or 0.9% quarter-over-quarter. Both figures would represent a small uptick in growth versus the results from the preceding quarter. Said results could also be a factor in services inflation trending at a more than 20-year high, especially with unemployment trending at multi-decade lows. Thursday employment report for April is tipped to unveil no change to the unemployment rate, which currently sits at 3.5%. Survey responses suggest around 25,000 jobs may have been added to the economy last month, which would be well below the gains recorded across the preceding two months.Further afield, the Group of Seven (G7) summit starts on Friday, while GDP readings from the Eurozone and Japan should also serve as talking points for the week ahead.

Stocks on watch

Major banks ANZ (ASX: ANZ) and Macquarie Group (ASX: MQG) are both trading ex-dividend today, which could weigh on the broader market. The pair recently handed down earnings, and despite profits soaring, the bank sector has faced some pressure amid the uncertain economic outlook. In addition, signs that margins may have already peaked are prompting some caution from the banks, and even a rethink in terms of aggressive home loan pricing. Gold giant Newcrest Mining (ASX: NCM) has given the nod to a takeover offer from US-listed Newmont. The company's Board has unanimously recommended that shareholders vote in favour of the deal, which would see Newcrest shareholders receive 0.40 Newmont shares for every share in NCM they hold. Newcrest will also be permitted to pay a franked special dividend of up to $US1.10 per share around the time the deal is wrapped up. Based on implied values, the deal values Newcrest at an enterprise value of $28.8 billion, and Newmont would be tradeable on the ASX via CHESS depositary interests.As Silver Lake Resources (ASX: SLR) continues its pursuit for St Barbara (ASX: SBM) Leonora gold assets, reports suggest the company second bid has fallen short of its target expectations. SLR second bid, valued at more than $700 million, was raised against a rival offer from Genesis Minerals, which already received the green light from St Barbara management last month. 

One of the primary sticking points for the two parties, despite SLR offer being higher on paper, is that it has not undertaken due diligence. As such, any adverse findings that raise the prospect of Silver Lake walking away from a deal would be unlikely to win over support from St Barbara lending syndicate, which stepped in to support the gold producer solvency status in exchange for control.

Lithium explorer Liontown Resources (ASX: LTR) enters the new trading week full of momentum. The company, which was the subject of a high-profile takeover bid from US-listed Albemarle, recorded a fresh all-time high last week, topping $3 per share. That is nearly 15% higher than the bidding price received from Albemarle, with investors likely anticipating a revised bid from the lithium giant, or perhaps even another industry player.Two ASX stocks set to deliver earnings reports this week include James Hardie (ASX: JHX) and Xero (ASX: XRO). 

Fourth-quarter results from James Hardie round out the company financial year. Last quarter the business was hit by sales headwinds arising from the downturn in the US housing market, as well as rampant inflation and restructuring costs. With the housing boom in Australia also behind us, investors will tune in closely to the company forward guidance, which follows three separate earnings downgrades for the 12 months to March 31, 2023.

On the other hand, Xero downsized its workforce a couple months back - part of a broader sign within the tech industry that tough times await. Management offered commentary suggesting the company was shifting its focus to profitability, so shareholders will likely be assessing forward-looking initiatives on that front, and whether the company opts to scale back its efforts in the US market, where customer acquisition has proven costly.

In the US, retailers take centre stage thanks to earnings from Walmart (NYSE: WMT), Target (NYSE: TGT), and Home Depot (NYSE: HD). Having significantly underperformed the market in 2023 thus far, the retail sector is the last to deliver Q1 results. 

The figures are sure to provide context on the health of consumer spending in the face of sticky inflation and a potential recession. Walmart has outperformed its peers this year thanks to changing consumer behaviours as consumers look to more affordable products. In contrast, Home Depot has been susceptible to a slowdown in discretionary spending. Nonetheless, inflation will be the key driver for activity across the sector.

And finally, Alibaba (NYSE: BABA) is scheduled to report earnings for its fiscal year on Friday US-time, before the market opens for trading. Expectations are firmly in check ahead of the results. A major round of earnings downgrades from brokers over the last three months suggests investors do not expect the Chinese e-commerce giant to benefit from China reopening, where March retail sales jumped by double-digits, and quarterly GDP expanded at its fastest rate in a year.