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[Bloomberg]( Full-blown trade war becomes baseline scenario, it’s PMI day, and May hangs by a thread. Not going well The breakdown in Sino-U.S. talks and the latest [targeting of Chinese companies]( by the White House has economists at investment banks increasingly pessimistic about the long-term outlook. Goldman Sachs Group Inc., Nomura Holdings Inc. and JPMorgan Chase and Co. are among those pricing-in a [greater chance]( of a protracted trade war. One China analyst sees both sides stuck in a cycle of “[fighting and talking](” until 2035. Meanwhile, the fallout is hitting emerging-market investors’ favorite tech companies, with the three biggest [losing $170 billion]( in value so far this month. PMI day Purchasing-managers survey data for the euro area came in softer than expected. German manufacturing continuing to be a weak spot, with the [reading at 44.3]( both below forecasts and a drop from April’s 44.4. The country’s IFO survey of business expectations showed confidence fell to the [lowest level in four years](. It was a different story in France where the private sector expanded at the [fastest pace in six months](. Overall, PMI for the euro area remained relatively subdued, with the reading for the currency zone [inching higher]( to 51.6 from 51.5. Data for the U.S. economy is due at 9:45 a.m. Eastern Time. Sponsor Content by PIMCO A Tale of Three Cycles Risk assets have staged a remarkable rebound from dark days of December, but how long can the rally last? [Here’s why we think global risk assets could become more volatile again.](  Staying power? British Prime Minister Theresa May’s political future [hangs by a thread]( as a revolt against her leadership, which saw the resignation of a [senior minister yesterday](, gathers pace. Today’s [European elections]( in the U.K. may give her a brief reprieve until polls close, at least. Speculation is mounting that she may resign tomorrow. Even if she survives until the weekend, a poor showing when those election results are [announced on Sunday]( could be the final nail in the coffin. Pound investors continue to vote with their feet, as the currency stays on its [record losing streak](. Markets drop Overnight, the MSCI Asia Pacific Index slipped 0.7% while Japan’s Topix index closed down 0.4% following a drop in factory activity and continuing yen strength. In Europe, the Stoxx 600 Index was 1.4% lower at 5:50 a.m. after weak PMIs added to fears about global trade. S&P 500 futures pointed to a [drop at the open](, the 10-year Treasury yield was at 2.357% and gold was a little higher. Coming up… Weekly initial jobless claims, published at 8:30 a.m., are expected to show a slight climb to 215,000. At 9:45 a.m., consumer confidence data along with PMIs are due. New home sales numbers for April are released at 10:00 a.m. The ECB publishes an account of its most recent policy meeting this morning, after yesterday’s Fed minutes signaled continuing [patience on rates](. Speaking of the Fed, today Dallas Fed President Robert Kaplan is joined on a panel by San Francisco Fed President Mary Daly, Atlanta Fed President Raphael Bostic and Richmond Fed President Tom Barkin. Best Buy Co. Inc. reports in what has [been a mixed](, [at best](, earnings season for retailers. What we've been reading This is what's caught our eye over the last 24 hours. - Citigroup says it is time to [get out of 10-year Treasuries]( after rally. - Powell is just one of [many global central bankers]( under political pressure. - Japanese bond investors [go shopping in Europe](. - Trump’s tariffs send shock waves through [Spain’s olive groves](. - Tesla’s woes make it a “[restructuring story](,” Morgan Stanley says. - How would you [lead the European Union](? - Scientists break record for [highest temperature superconductor](. Want the lowdown on European markets? Get the [European edition of Five Things]( in your inbox before the open, every day. And finally, here’s what Joe's interested in this morning In gambling, the term [freeroll]( refers to any situation in which the bettor is in a position to make a wager with zero downside risk, but significant upside. In any democratic system, opposition politicians are given the chance to make freerolls all the time, and we've seen many such examples over the years. Republicans made a lot of hay in the U.S. blasting Obamacare, and promising to deliver something much better. That was a pure upside play as long as they didn't control the White House. Once Trump won, and they actually had downside risk, the bet didn't work anymore. Arguably the hardcore Brexiteers have been freerolling, pushing for a break with the EU, but not really being in a position where managing such a scenario actually fell to them. [With Theresa May hanging on by a thread](, it's plausible that the next U.K. PM will be someone who has rhetorically taken on a much harder stance on leaving Europe. At that point, the pro-Brexit cause would cease to be a freeroll, and then who knows, maybe a deal, ironically, becomes more plausible. 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