Key takeaways:

• Australia major banks remain wary about tough times ahead  

• US inflation data will make or break the case for further Fed tightening

Australian shares are set to storm out of the gate at the opening bell, in a week where the federal budget, bank earnings, and US inflation will be hot topics. 

Economic Calendar and News

All the talk among finance pundits this week will focus on Tuesday federal budget. 

At a headline level, there are rumours the budget could briefly return to surplus as the impact of favourable commodity prices and a strong jobs market underpin temporary gains on paper, before a return to deficit in FY24. Perhaps more telling, it is anticipated that Australia will enter a per-capita recession in the coming year.

Beyond that, cost of living support is set to be a primary talking point for households, with subsidies and support payments intended to directly lower inflation during FY24. It should be noted, however, inflation is already tipped to decrease through this period and mooted energy relief' has largely been rebadged from measures announced some time back, yet were not rolled out earlier.

Other areas of spending are expected to cover primary healthcare, delivering aged care services, childcare subsidies, as well as welfare increases and rent assistance across specific cohorts. 

At the same time, savings are expected to be derived from a review and scale down of infrastructure and longer-term NDIS costs, while revenue is being eyed via tax moves against gas producers and superannuation members with balances exceeding $3 million.

In the US, April inflation data is the big-ticket item. On Wednesday, US-time, the Consumer Price Index (CPI) will be published, before the Producer Price Index (PPI) follows a day later. 

Economists' forecasts suggest CPI increased 0.4% in April after a gain of 0.1% in March. On an annual basis, prices are tipped to have grown 4.9%, which would be the slowest increase in two years. Core inflation is expected to be a little more sticky, with forecasts suggesting 5.6% growth year-over-year.

Stocks on watch

After last week results from two of the Big Four, attention will be squarely on the rest of the cohort, including Westpac (ASX: WBC) and Commonwealth Bank (ASX: CBA). 

Westpac half-year results, delivered this morning, continued the theme among the banks, with competition heating up. While profits have jumped significantly versus a year ago, rising interest rates have not been the major tailwind that observers expected. This is because lenders are competing fiercely for home loans and deposits, while wholesale funding costs have increased. 

Nonetheless, Westpac net profit leapt 22% in the most recent half, with core net interest margins growing year-over-year by 20 basis points to 1.9%, and 10 basis points versus the preceding half. On the back of the result, management has increased the dividend by 15% to 70 cents per share, but intense mortgage competition is expected to negatively impact industry and Westpac margins in the next half. CBA will deliver its third-quarter trading update on Tuesday.In light of the federal budget, energy stocks may attract a greater level of scrutiny over the coming days. Among detailed changes, the government will look to increase the Petroleum Resources Rent Tax by $2.4 billion over the next four years as part of a tax grab that sees deductions capped at 90% of gas project income, seven years after first gas production. That figure could have been even higher were other alternatives pursued, however, it follows a series of government interventions targeting the sector. Some of the stocks that investors may take a closer look at for any impact include gas producers like Woodside Energy (ASX: WDS), Santos (ASX: STO), and Beach Energy (ASX: BPT), among others.Gold prices came off the boil somewhat during Friday night offshore trading session, with the precious metal shedding approximately 2% before paring those losses. In any case, the gold sector has been on a tear over recent months, and it remains to be seen whether gold can finally set a fresh all-time high, and secondly, whether investors stick it out with names like Evolution Mining (ASX: EVN), Newcrest Mining (ASX: NCM), and Northern Star Resources (ASX: NST).Elsewhere, diversified Australian agribusiness Graincorp (ASX: GNC) is set to hand down its HY23 financial results on Thursday. Six months ago the business dished out a special dividend to shareholders amid record earnings underpinned by bumper crops. However, margins softened through the second half of last financial year, and inclement weather delayed harvest operations, so investors will likely turn to commentary on these areas.Another ASX name set to deliver earnings this week is CSR (ASX: CSR). The building products supplier is scheduled to announce full-year results on Wednesday. Inflation is sure to be a focal point within the company report, but investors may also choose to pay close attention to CSR investment plans, share buyback, and outlook in relation to the housing market. Warren Buffett Berkshire Hathaway (NYSE: BRK.B) held its annual general meeting over the weekend, and as always, the Oracle of Omaha had plenty to say. 

Buffett expects Berkshire businesses to see a slowdown in earnings as economic activity eases, but he also went some way towards dismissing concerns about deposits held by US banks. 

Furthermore, he was quick to sing the praises of tech giant Apple (NASDAQ: AAPL), arguing it is a better business than any other in the Berkshire stable, while the commercial real estate sector is starting to feel the impact of higher interest rates. And finally, keep an eye out for results from PayPal (NASDAQ: PYPL), Palantir (NYSE: PLTR), Airbnb (NASDAQ: ABNB), and Walt Disney (NYSE: DIS). In the case of Walt Disney, the company streaming platform suffered in the last quarter when subscriber numbers fell 1%, and DIS shares are still down 16% over the last year. Another driver behind that decline is the company feud with Florida Governor Ron DeSantis regarding Disney World special taxing district.SelfWealth Ltd ABN 52 154 324 428 (Selfwealth) (AFSL 421789). The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser and/or accountant. Taxation, legal and other matters referred to on this website are of a general nature only and should not be relied upon in place of appropriate professional advice.