Month: May 2026

Amid the fog of war and fading ‘hard’ data, the final April S&P Global Manufacturing PMI printed 54.5, a small gain from the flash 54.0 print, and higher than the 52.3 February final print, although it came with a warning from Chris Williamson, Chief Business Economist at S&P Global Market Intelligence:

“The surge in manufacturing activity in April is not the cause for cheer that at first glance it suggests. A key driving force behind the upturn is the need for companies to get ahead of further feared price rises and supply shortages, providing a short-term boost that could fade in the coming months as headwinds to the economy continue to build… employment has fallen as firms grow increasingly worried over the need to reduce cost overheads amid an environment of rising raw material prices, while selling prices have jumped higher as producers seek to protect their margins.

There was some good news: “More encouragingly, business expectations for output in the year ahead have improved, partly reflecting hopes that the US will be less affected by the war than previously feared, and less than other economies, as well as reduced concerns over the impact of tariffs given the recent Supreme Court ruling. However, some of these improved expectations of future production gains reflected a reaction to better than anticipated order book inflows in April, which may prove to be a chimera as the stock building boost fades.”

Shortly after, the ISM Manufacturing PMI published its April number which remained unchanged at 52.7, matching the highest since August 2022, and missing estimates of an increase to 53.2

However, a look under the hood reveals that like last month, there was continued deterioration in the core components: Under the hood, Prices Paid continued to rise dramatically while New Orders and Employment dipped again – another indication that stagflation remains the biggest risk for the economy.

• New Orders 54.1, missing expectations of 54.5
• Prices Paid 84.6, higher than expectations of 80.3
• Employment 46.4, missing expectations of48.8

As shown below, the New Orders Index expanded for the fourth straight month after four straight readings in contraction, registering 54.1 percent, up 0.6 percentage point compared to March’s figure of 53.5 percent. The April reading of the Production Index (53.4 percent) is 1.7 percentage points lower than March’s reading of 55.1 percent. The Prices Index remained in expansion (or ‘increasing’ territory), registering 84.6 percent, a 6.3-percentage point jump from March’s reading of 78.3 percent. In the last three months, the Prices Index has increased 25.6 percentage points to reach its highest level since April 2022 (84.6 percent). The Backlog of Orders Index registered 51.4 percent, down 3 percentage points compared to the 54.4 percent recorded in March. The Employment Index registered 46.4 percent, down 2.3 percentage points from March’s figure of 48.7 percent.

Some more details:

“In April, U.S. manufacturing activity remained in expansion territory, growing at the same pace as the month before. Of the five subindexes that make up the PMI®, the New Orders and Supplier Deliveries indexes indicated faster growth compared to the previous month, the Production Index grew at a slower rate, and the Employment and Inventories indexes remained in contraction.

“Two of four demand indicators (the New Orders and Backlog of Orders indexes) remain in expansion, although the Backlog of Orders Index dropped 3 percentage points compared to March. The New Export Orders Index remained in contraction with a 2-percentage point decrease, and the Customers’ Inventories Index remains in ‘too low’ territory, contracting at a slightly faster rate. A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production.

“Regarding output, the Production Index is in expansion for the sixth month in a row (although it lost ground compared to March), and the Employment Index decreased by 2.3 percentage points and remains in contraction. Among panelists, 60 percent indicated that managing head counts remains the norm at their companies as opposed to hiring, and of those managing head counts, 34 percent are using layoffs and 43 percent using attrition or not backfilling positions.

“Finally, inputs (defined as supplier deliveries, inventories, prices, and imports) had another month of mixed results. The Supplier Deliveries Index indicated increasingly slowing deliveries, the Inventories Index contracted at a slower rate, and the Prices Index vaulted again — up another 6.3 percentage points to 84.6 percent, from 78.3 percent in March, and the highest reading from April 2022, when it was also at 84.6 percent. The Imports Index lost 2.3 percentage points for a reading of 50.3 percent, compared to 52.6 percent in March.

“Looking at the manufacturing economy, 19 percent of the sector’s gross domestic product (GDP) contracted in April, compared to 16 percent in March, and the percentage of manufacturing GDP in strong contraction (defined as a composite PMI® of 45 percent or lower) decreased to 2 percent, compared to 4 percent in March. The share of sector GDP with a PMI® at or below 45 percent is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, four (Transportation Equipment; Machinery; Computer & Electronic Products; and Chemical Products) expanded in April,” says Spence.

According to the report, “In April, U.S. manufacturing activity remained in expansion territory, growing at the same pace as the month before. Of the five subindexes that make up the PMI, the New Orders and Supplier Deliveries indexes indicated faster growth compared to the previous month, the Production Index grew at a slower rate, and the Employment and Inventories indexes remained in contraction.”

Yet for all the rhetoric, what matters is that  prices continued to rise, surging to 84.6, the highest since April 2022 and approaching their 2021 record high, while employment shrank further into contraction, down to 46.4, the lowest print of 2026.

Furthermore, as expected the Iran war remains: “In this second month of the Iran War (at the time of data collection), 31 percent of the comments were positive and 69 percent negative, with a positive to negative sentiment ratio of 1 to 2.2. Among comments, the war was mentioned in 47 percent and tariffs in 18 percent. As was the case last month, some panelists referenced both topics within a single comment or in mixed sentiment.”

Obviously, if the war persists and price pressures and supply delays accelerate, demand, employment and production capabilities will inevitably start to be even more adversely affected until the broader economy finally cracks. 

By Elwin de Groot, head of macro strategy at Rabobank

Some headlines write themselves. Tokyo has already delivered one – and likely acted on it. Tehran may be waiting for its turn. The bond market, meanwhile, could have issued another warning to the Fed. As for the long-held consensus that 2026 would bring smooth disinflation, gentle policy easing, and AI-driven multiple expansion, that narrative has been under strain for some time. Yesterday’s European inflation – and to a lesser extent growth – data did little to support it. Both US and Eurozone Q1 GDP undershot expectations even as inflation pressures persist. To be sure, central banks held their fire, but no one can say they haven’t been warned.

Start with the yen, because that’s where yesterday’s most audible bang came from. After Finance Minister Katayama and top FX diplomat Mimura took turns at the microphone delivering what Mimura himself called Japan’s “final evacuation warning” to markets, USD/JPY collapsed from above 160 to under 156 – the largest one-day move in the dollar against the yen since December 2022.

The MOF, predictably, won’t confirm. But when a currency moves three big figures in a few hours with no other catalyst, traders who’ve sat through previous interventions tend to recognize the fingerprints. While writing this Daily, the USD/JPY pair is coming down sharply again.

The bigger issue, however, is whether intervention can do more than briefly stabilize markets. Japan faces structural pressures: it is a major energy importer amid elevated oil prices, and its central bank is cautiously pursuing policy normalisation after years of ultra-loose settings. Recent spikes in government bond yields – touching multi-decade highs – highlight the risks. Authorities can resist market forces for a time, but they cannot fundamentally change them.

Speaking of which: oil. Brent traded above $125 yesterday in early European trading on yet more reporting that Washington is preparing for an extended blockade of Iran’s ports and may be considering renewed military action, before being abruptly knocked lower in heavy volume – possibly, some sources suggested, by official Japanese selling alongside the yen operation. So have we arrived at the point where finance ministries are actively managing crude on the side?

What is more interesting is that they smashed oil (-$6 in seconds) first https://t.co/PHpElFAZAb pic.twitter.com/Ax00iGlLXl

— zerohedge (@zerohedge) May 1, 2026

In any case, oil appears to be holding on to its decline despite rising geopolitical tensions. The UAE has urged its citizens in Iran, Lebanon, and Iraq to leave “immediately,” citing deteriorating regional conditions. At the same time, sources suggest the US is completing final pre-strike preparations, including intelligence gathering on Iranian oil infrastructure. In response, Iran is reportedly planning a “dual response”: missile strikes on Gulf energy assets and US-linked bases, alongside a potential closure of the Strait of Hormuz using mines and missiles. Senior US military officials have briefed President Trump on updated options for possible action against Iran. In short, multiple warnings have been issued, and the situation remains highly fluid – meaning the landscape could shift markedly over the coming days. Warnings are out.

In the Eurozone, April’s flash HICP rose to 3.0% y/y – the highest since September 2023 – driven largely by a 10.9% surge in energy prices, with inflation accelerating across Germany, France, Spain, and Italy. While the headline print was slightly below our forecast, this mainly reflected easing in core inflation, particularly services, which slowed from 3.2% to 3.0% y/y. This distinction is important. The headline signals renewed pressure, but core dynamics suggest inflation has not yet broadened into a wage‑price spiral that would warrant aggressive monetary tightening beyond limited “warning shots.” We expect Eurozone inflation to average around 3.1% in 2026, easing to 2.5% in 2027. While still above pre-war expectations – by roughly 1.7 percentage points cumulatively – this profile does not justify tightening policy into a slowing growth backdrop.

Indeed, Eurozone GDP data sharpened the inflation–growth trade-off. Q1 growth came in at just 0.1% q/q, below the 0.2%–0.3% consensus. France stagnated, Italy slowed, Germany surprised modestly to the upside at 0.3%, and Spain remained the standout at 0.6%. Importantly, most of the quarter predates the peak of the Iran-related energy shock, meaning the weakness reflects an economy already losing momentum rather than the direct impact of recent geopolitical developments (see our more in-depth take here). This suggests Q2 is likely to be similarly weak – or weaker in underlying terms – and implies that the ECB’s prior growth projections were already too optimistic before the latest shock. Our forecasts see Eurozone growth slowing from 1.5% in 2025 to 0.6% this year, followed by a modest recovery to 0.9% in 2027.

Against this backdrop, the ECB left rates unchanged at 2%, as widely expected. The decision itself was uneventful; the message was not. The Governing Council acknowledged that “upside risks to inflation and downside risks to growth have intensified,” with President Lagarde describing the outcome as “an informed decision on the basis of yet-insufficient information.” That phrasing suggests the decision was finely balanced, with some policymakers inclined to move – a message that also came through via ‘sources’ shortly after the press conference had ended.

Our ECB watcher Bas van Geffen characterises this as a “June or never” moment – and the uncertainty embedded in that phrase is key. Hawks still have a window to push for tightening, but it is narrowing. Earlier in the month, markets had priced in multiple hikes, driven by inflation concerns, yet that urgency has since faded. Financial conditions have remained orderly: spreads are contained, equities resilient, and no disorderly market reaction has emerged to compel ECB action. In that environment, the burden of proof shifts to those advocating a hike. 

Our base case remains a 25bp increase in June, taking the deposit rate to 2.25%. June offers fresh staff projections and another month of data, making it the natural decision point. However, if the ECB does not act then, the case for tightening weakens materially. By July, energy pass-through should be near its peak, and evidence of second-round effects – if present – should be clearer. Absent such evidence, the argument for higher rates loses traction. A key condition for a June pause, however, would be a meaningful easing in energy prices, implying improvement in Middle East tensions – something not evident at present. The ECB, for its part, cannot be accused of failing to signal these risks.

Across the Channel, the Bank of England struck an “Alert but careful” tone, also holding rates steady. Governor Bailey described the stance as an “active hold,” balancing persistent inflation risks against growing concerns over employment and activity. While the BoE reiterated that it stands “ready to act as necessary,” both the minutes and Bailey’s remarks suggested reluctance to move prematurely. An overload of scenarios and caveats provided limited forward guidance. That said, we expect more Monetary Policy Committee members to lean toward tightening in June. Ultimately, how far that shift goes will depend heavily on developments around the Strait of Hormuz and the extent to which higher energy costs feed through into broader inflation.

The Department of War has finalized agreements with OpenAI, Google, SpaceX/xAI, Microsoft, Amazon, Nvidia, and Reflection AI to deploy AI tools in “classified settings.” This means these tools will operate within secure government networks where sensitive or secret national security information is handled, according to The Wall Street Journal.

Anthropic’s Claude had previously been one of the few AI tools available on Palantir’s Maven platform. However, after the DoW labeled Anthropic a supply chain risk, the department pushed to broaden access to AI tools for top-secret work.

The deal with the seven AI companies to unleash these models for secret national-security work, such as intelligence reports, satellite imagery, drone feeds, signals data, battlefield updates, logistics data, or classified planning documents, merely reflects that Silicon Valley is coming around in supporting the DoD after years of rejecting work with the department.

Emil Michael, undersecretary of defense for research and engineering, told the outlet, “We are equipping the warfighter with a suite of AI tools to maintain an unfair advantage and achieve absolute decision superiority.”

A Reflection spokeswoman told the outlet, “This shared understanding with the Pentagon is a first step in supporting U.S. national security, and sets a precedent for how AI labs could work across the U.S. government, from supporting our servicemembers to our scientists.”

The first indication that at least one Big Tech company had reached a deal with the DoW came on Thursday afternoon, when NBC News reported that Google had agreed to deploy its powerful Gemini AI systems on classified networks.

Defense Secretary Pete Hegseth has made AI a top priority for the armed forces, vowing to transform the military into “an AI-first warfighting force.”

“We are proud to be part of a broad consortium of leading AI labs and technology and cloud companies providing AI services and infrastructure in support of national security,” Google spokesperson Kate Dreyer said in an email to NBC News.

Hegseth on Thursday defended the DoW’s use of AI tools in classified military operations, telling Congress that “humans make decisions” and that “AI is not making lethal decisions.”

Hegseth called Anthropic’s CEO an “ideological lunatic,” which only shows the rift between the left-leaning AI startup and the military is widening. 

*HEGSETH SAYS ANTHROPIC IS RUN BY `AN IDEOLOGICAL LUNATIC’

— zerohedge (@zerohedge) April 30, 2026

According to Tech Crunch, Anthropic is in the process of closing another fundraising round, asking investors to submit applications over the next two days as the startup seeks $50 billion at a $900 billion valuation. The previous valuation of $380 billion was in February. 

Authored by Janice Hisle via The Epoch Times,

In his latest action targeting Minnesota fraud, Dr. Mehmet Oz, administrator for the Centers for Medicare & Medicaid Services, said his agency would delay paying $91 million in Medicaid claims to the state.

“This is about protecting patients and respecting taxpayers,” Oz said in a video posted April 30 on X, announcing the decision.

The money being withheld includes “$76 million tied to 14 service categories highly vulnerable to fraud,” Oz wrote on X. The remaining deferred payments—$14 million—could potentially have been directed “towards illegal immigrants who weren’t supposed to be getting this coverage,” he stated in the video.

The most recent amounts are on top of an initial $259 million the agency halted in February amid the North Star State’s ongoing fraud scandals.

Minnesota sued Oz’s agency and the U.S. Department of Health and Human Services over that decision, but earlier this month a federal court refused to unfreeze the funds as the litigation continues.

Oz said he notified Minnesota Gov. Tim Walz and other state officials before going public with his most recent decision. The Epoch Times sought comment from Walz but received no reply prior to publication.

Minnesota’s fraud scandals drew widespread attention in late 2025. Since then, President Donald Trump has ratcheted up fraud investigations across the nation. Trump appointed Vice President JD Vance to head an anti-fraud task force and the Justice Department formed a National Fraud Enforcement Division.

Oz’s new Minnesota funding freeze comes two days after agents raided 22 Minnesota sites in connection with fraud investigations.

The state’s issues with the defrauding of its public programs follow “a pattern we can’t ignore,” Oz said.

“Minnesota’s Medicaid program has shown serious vulnerabilities to fraud,” Oz wrote. “These are not isolated breakdowns—they point to systemic issues that must be addressed.”

The federal government funds roughly half of Medicaid, he wrote, which gives his agency “the authority and the responsibility to ensure those dollars are spent legally and appropriately.”

Medicaid will refuse to pay “bad bills,” he said, adding that Minnesota is therefore being asked to provide more documentation to justify payment of the requested funds. “When something doesn’t look right, we investigate; it’s our job.”

Oz said his agency is providing “as much support as we can” to help Walz “turn this around.”

Earlier this year, following months of nationwide attention on Minnesota’s fraud-plagued programs, Walz asked state lawmakers to enact what he called “a comprehensive anti-fraud package.”

In an April 17 newsletter, Minnesota Rep. Kristin Robbins, who chairs the state’s anti-fraud legislative committee, said she remains concerned that officials with two key state agencies have continued to testify that “they don’t think anyone who fails to do their job will be fired.”

“Instead, they talked about how they will provide additional training and support,” Robbins said.

Robbins is running as a Republican gubernatorial candidate to replace Walz, who withdrew his reelection bid amid the scandals. She wrote that she supports a few of Walz’s fraud-prevention ideas, including upgrading computer systems that are used to verify eligibility for government benefits. She also agrees with Walz that the time limits for prosecuting fraud crimes should be extended beyond the current six years. Walz proposed a one-year extension, Robbins said, but she proposed a bill calling for an additional four years so that prosecutors could move forward with charges a decade after the alleged offenses.

“The most important element in preventing fraud is creating a no fraud, no excuses culture,” Robbins wrote.

Online gaming platform Roblox crashed the most in four years in premarket trading to the tune of 24%, after the company reported weaker-than-expected first-quarter user metrics and slashed its full-year bookings outlook.

One of the major problems plaguing Roblox has been that new child-safety features, including age-verification requirements and limits on platform communication, have slowed user growth.

Daily active users came in at 132 million, missing the Bloomberg Consensus estimate of 143.8 million, while hours engaged also missed estimates.

Here’s a snapshot of first-quarter results (courtesy of Bloomberg):

• Daily active users 132 million, estimate 143.8 million (Bloomberg Consensus)

• Bookings $1.7 billion, estimate $1.73 billion

• Hours engaged 31 billion, estimate 33.68 billion

• Revenue $1.4 billion, estimate $1.42 billion

• Loss per share 35c vs. loss/shr 32c y/y, estimate loss/shr 40c * Free cash flow $596 million, estimate $564.5 million

Despite the user and bookings misses, free cash flow exceeded Bloomberg Consensus estimates, coming in at $596 million versus expectations of $564.5 million.

Second-quarter forecast (courtesy of Bloomberg):

• Sees bookings $1.55 billion to $1.61 billion, estimate $1.88 billion

• Sees revenue $1.39 billion to $1.45 billion, estimate $1.45 billion

• Sees consolidated net loss $242 million to $257 million, estimate loss $253 million

And full-year forecast (courtesy of Bloomberg):

• Sees bookings $7.33 billion to $7.60 billion, saw $8.28 billion to $8.55 billion, estimate $8.38 billion

• Sees revenue $5.87 billion to $6.14 billion, saw $6.02 billion to $6.29 billion, estimate $6.6 billion

• Sees consolidated net loss $1.04 billion to $1.18 billion, saw loss $1.14 billion to loss $1.30 billion, estimate loss $1.15 billion

Goldman analyst Eric Sheridan offered clients his first take on the earnings:

In its Q1 ’26 earnings report, Roblox (RBLX) management framed a few key themes: 1) the rollout of age verification resulted in larger than expected engagement headwinds during the quarter – with management framing decreased communication (in-game chat) within experiences as having a likely impact on App Store ratings (and driving headwinds to organic user acquisition); 2) on the back of engagement headwinds, paired with the exit from Russia, Q1 DAUs underperformed relative to GS/Street expectations – and is now expected to continue to decline on a sequential basis during Q2’26; 3) positive commentary surrounding US O18 DAUs – with the cohort growing 40%+ YoY (vs. overall UCAN DAU growth of 17% YoY during Q1); & 4) an emphasis on scaling out novel experiences – with mgmt. supporting the rollout of novel game creation through an increase in targeted DevEx rates, & the announcement of several creator programs (incl. Roblox Jumpstart & Incubator).

In total, Roblox management initiated and implemented a series of long-term structural changes (which should be positive for long-term platform health and growth), including a lowered 2026 guidance for bookings & Adj. EBITDA, but by doing so, the company must now rebuild investor confidence in the building blocks toward its long-term goals of scaling to 10%+ market share in the US/global gaming content market while also navigating increased regulatory scrutiny on user safety.

Over the coming quarters, we believe that further visibility into user growth (acquisition & retention), and engagement heading into 2H will likely be needed for investors to gain confidence around the long-term growth algorithm of RBLX. To be more pointed, this is unlikely to be a one quarter recovery story – we think additional visibility into the navigation past tougher comps in 2H 2026 and the trajectory of 2027+ operating margins will be critical for forward operating estimates and a truer measure of valuation multiples aligned with growth outcomes. That said, at current share price levels, the valuation skew on the shares leaves us constructive on the stock.

While this reset in expectations is difficult, we view Roblox mgmt as reiterating its long-term goals surrounding: 1) compounded forward bookings growth of 20%+; 2) the potential for increased user monetization on the back of a number of initiatives (optimized and dynamic pricing in emerging markets, scaling of Novel games, etc.); & 3) a scaling Adj. EBITDA margin in 2027+ on the back of fixed cost leverage – even when including DevEx increases.

We reiterate our Buy rating on the shares and update our forward operating estimate for this set of earnings results & mgmt commentary and adjust our 12-month price target from $125 to $65.

Q1’26 Positives & Negatives:

Positives: a) Positive commentary surrounding the O18 user opportunity with the US cohort growing 40%+, with mgmt also highlighting that the cohort monetizes at a 50%+ higher rate than U18 US DAUs; b) continued expansion of offerings to native advertisers & adoption by creators, with more than 60 out of the top 100 creators using RBLX’s native ads manager – and mgmt. reiterating confidence surrounding the long-term growth potential of the business initiative; & c) mgmt reiterated their commitment toward driving an expansion in Novel game offerings – with the announcement of targeted DevEx rate increases (beginning on June 8th) & the launch of several programs to support creators (incl. Roblox Jumpstart & Incubator).

Negatives: a) Q2 & 2026 bookings/Adj. EBITDA guidance came in well below GS/Street (and prior FY26 guidance) estimates, as the company reflects ongoing headwinds from safety initiatives, continued investments into long-term strategic priorities, paired with lower fixed cost leverage (due to lower bookings growth assumptions); b) Q1 DAUs were below GSe/Street expectations due to greater-than-expected headwinds from the rollout of age-checks and the platform ban in Russia – with mgmt. also expecting DAUs to continue to decline on a sequential basis during Q2; c) on the back of age verification checks (which were a headwind to communication on the platform during Q1), RBLX App Store ratings declined, resulting in a reduction to organic signups that have traditionally been derived from the app store; & d) mgmt noted that additional algorithm & home page layout experimentation (which are expected to continue in Q2) could result in near-term headwinds to bookings & engagement.

Additional institutional commentary (courtsey of Bloomberg):

Bloomberg Intelligence analyst Nathan Naidu

• “Roblox’s push to have users complete age verification or face limits on platform communication is expected to extend a near-term slowdown in engagement and bookings but should support longer-term growth by addressing child-safety scrutiny and heavy sales concentration in a few major games”

Morgan Stanley analyst Matthew Cost (overweight, PT $62)

• Roblox’s age verification system is creating headwinds

• “That said, this system is fully within RBLX’s control and fixes are on the way, as strength beneath the surface could create greater room for revisions ahead.”

Jefferies analyst James Heaney (hold, PT $46 from $60)

• Against what were already low expectations, Roblox’s updated FY26 bookings forecast “will continue fueling the bear case for the stock.”

• “Primary issues were unexpectedly negative impacts from age check rollout and discovery algo changes, both of which could be multi-quarter headwinds.”

Market reaction to the dismal earnings report sent Roblox shares crashing in premarket trading, down 24%, and if losses persist through the cash session, this would be the largest intraday decline since the 26% plunge on February 16, 2022.

Boom/bust…

The broader takeaway is that parents may be becoming more aware of the risks of their children spending hours in online gaming ecosystems, particularly on platforms with social chat features and monetized engagement loops.