RBS

For those just catching up on the main news event of the weekend, namely the sudden surge in Scotland "Yes" vote polling surpassing 50% for the first time, here is a complete round up of the background, updates and expert reactions from RanSquawk, Bloomberg and AFP.

After being solidly ignored for weeks, suddenly the Scottish independence referendum is all anyone can talk about, manifesting itself in a plunge in the GBPUSD which ha slide over 100 pips in the past 24 hours, adding to the slide over the past week, and is now just above 1.61, the lowest since November 2013. In fact, the collapse of the unionist momentum has managed to push back overnight news from Ukraine, major Russian sanction escalations, Japan GDP as well as global trade data on the back burner. Speaking of global trade, with both China and Germany reporting a record trade surplus overnight, with the US trade deficit declining recently, and with not a single country in the past several month reporting of an increase in imports, one wonders just which planet in the solar system (or beyond) the world, which once again finds itself in a magical global trade surplus position, is exporting to?

A record-breaking surge in monthly credit creation and a trillion Yuan of QE-lite was enough to provide a glimmer of hope into the tumbling Chinese economy for one or maybe two months but with the real estate market continuing to free-fall, it should be no surprise that China's PMIs finally catch down to the erstwhile reality simmering under the surface in the ultimate centrally-planned economy. China's official government PMI dropped from 30-month highs, missed expectations and the early month flash print, to less exuberant 51.1 reading (with Steel industry new orders totally collapsing) with both medium- and small-companies printing contractionary sub-50 levels. Then (after Japan's PMI beat - of course it did as hard data crashes worst on record), HSBC China PMI also missed, printing a slightly expansionary 50.2 Showing, as BofA warns "the two PMIs both show that the current recovery is relatively weak and choppy..." and RBS adds "we expect the government to interpret such an outlook as challenging its growth target and to take more, and more significant, measures to support growth."

• Islamic State executes soldiers, takes hostages at Syria base (Reuters)
• Buffett Burger King Funds Flip Obama’s Inversion Calculus (BBG)
• Equities Reach Record $66 Trillion as S&P 500 Hits 2,000 (BBG)
• Central Banks Playing Own Version of Plaza-opoly With FX (BBG)
• Russia court closes McDonald's branch for 90 days (Reuters)
• Finland Says NATO an Option After Russia ‘Violates’ Border Laws (BBG)
• Netanyahu Hit With Domestic Criticism Over Gaza Truce (BBG)
• Biggest Danish Fund Readies for Rate Shock as Exit Narrows (BBG)
• Nonprofit Hospitals' Profits Fall (WSJ)

Curious what (long) positions hedge funds bought, sold, initiated or liquidated in the second quarter? Then the following summary, courtesy of RanSquawk is for you. And while these 13F reports are far less relevant than they used to be when central-planning wasn't the rule of the land, keep a close eye on these most frequently mentioned stocks: AAPL, DG, AAL, MNK, FB, PCLN, GM, VZ, AGN, AIG, DTV, CMCSA, WMB, QCOM, APC, and CBS.

The record-breaking outflows in high-yield bonds are not the only indication that the U.S. economy could be on the verge of very hard times. Retail sales are extremely disappointing, mortgage applications are at a 14 year low and growing geopolitical storms around the world have investors spooked. For a long time now, we have been enjoying a period of relative economic stability even though our underlying economic fundamentals continue to get even worse. Unfortunately, there are now a bunch of signs that this period of relative stability is about to end. The following are 14 reasons why the U.S. economy's bubble of false prosperity may be about to burst...

Ways for retail investors, and institutions small and large, to monetize a fundamental or economic outlook that the muppet masters will never tell you!

• Maliki digs in as U.S. pushes for new Iraq government (Reuters)
• Ukraine's forces say close to taking rebel-held Donetsk (Reuters)
• Anger Over Michael Brown Shooting Leads to Looting (WSJ)
• German Economy Backbone Bending From Lost Russia Sales (BBG)
• Kinder Morgan to Consolidate Empire (WSJ)
• Early Failure to Detect Gaza Tunnel Network Triggers Recriminations in Israel (WSJ)
• You’ll never guess how much BuzzFeed raised from Horowitz (FT)
• The dumb money is now chasing Chinese oligarchs: Norway’s Wealth Fund Buys $576 Million of Mayfair Area (BBG)
• Clinical trial to start soon on GSK Ebola vaccine (Reuters)
• No drone skeet shooting any time soon (WSJ)

• Pope Francis calls for action as Iraqi Christians forced to flee (Reuters)
• Richest Russians Deprived of Luxury Foods by Putin’s Ban (BBG)
• Exxon Drilling Russian Arctic Shows Sanction Lack Bite (BBG)
• Israeli Jets Strike Gaza Targets After Rockets Shatter Truce (BBG)
• U.S. starts aid airdrops in Iraq but no strikes yet (Reuters)
• Banks Said to Be Arranging Argentine Debt Buyer Group (BBG)
• Siberia Flight-Ban Threat Forces Airlines to Mull Options (BBG)
• Malaysia Airlines to Be Delisted in $429 Million Buyout (BBG)
• Erdogan poised to win Turkey's first popular presidential vote (Reuters)
• African Bank Fights Collapse in Espirito Santo-Like Drama (BBG)
• China to build lighthouses on five isles in defiance of U.S. call (Reuters)

With everyone focused on China as the source of next systemic risk, most forgot or simply chose to ignore Europe, which through Draghi's verbal  magic was said to be "fixed." Or at least everyone hoped that the rigged European bond market would preserve the "recovery" illusion a little longer giving the world some more time to reform pretend it is doing something to fix it. Turns out that was a mistake, confirmed earlier not only by the plunge in German Factory Orders which cratered -4.3%, down from 7.7% and below the 1.1% revised, and UK Industrial production which missed expectations of a 0.6% boost, rising only 0.3%, but most importantly Italy's Q2 GDP shocker, which as we reported earlier, dropped for the second consecutive quarter sending the country officially into recession. As a result, European stock markets, Stoxx600, has joined the DJIA in the red for the year while Germany's 2 Year Bund just went negative on aggressive risk aversion, the first time since 2012.

With rates seemingly flip-flopped today (yields higher as stocks drop), we thought it worth skimming what the smart money in the bond market is thinking. As RBS Strategist Bill O'Donnell warns, "Janet must act like a diving instructor, hoping to bring levels to the surface without giving the economy the bends. What makes it really risky for Janet is that financial sector regulation has created a ‘one-way valve’ in secondary market liquidity. Nobody really knows how the system will hold up under duress." This is confirmed by Scotiabank's Guy Haselmann who fears, "the Fed will have difficulties controlling market gyrations and its potential loss of credibility from troubles that are likely to arise from its exit strategy."

• Second Ebola patient to arrive in U.S. on Tuesday (Reuters)
• Ebola Drug Made From Tobacco Plant Saves U.S. Aid Workers (BBG)
• Egypt plans to dig new Suez Canal costing $4 billion (Reuters)
• Apple Buybacks Pay Most Ever as CEOs Spend $211 Billion (BBG)
• DeMark Says Sell China Stocks Now After World’s Best Gain (BBG)
• Investors Stung by Losses After Exiting Struggling Property Fund in China (WSJ)
• B.A. in BTFD: MIT May Consider Granting Degrees in Less Than Four Years (BBG)
• Too late, money's already been spent: GPIF Needs Overhaul Before Asset Changes, Shiozaki Says (BBG)
• Oh look, another "truce": Israel withdraws troops, 72-hour Gaza truce begins (Reuters)

• The market in one sentence: Buying on Dips Pays Most in Five Years as Stocks Rebound (BBG)
• Europe subdued, Russia shares tumble on new sanctions (Reuters)
• Chinese Data Don’t Add Up (WSJ)
• Argentine Default Drama Nears Critical Stage (WSJ)
• Global Pressure Mounts on Israel to End Gaza Fighting (BBG)
• Ukraine troops advance as experts renew attempt to reach crash site (Reuters)
• Prospects Brighten for Republicans to Reclaim a Senate Majority (WSJ)
• Europe’s banking union faces legal challenge in Germany (FT)
• Investors Bet on China's Large Property Developers (WSJ)
• Hague court orders Russia to pay over $50 billion in Yukos case (Reuters)

There has been little in term of tier 1 data releases to drive the price action so far in the overnight session which means participants focused on the upcoming US related risk events including the Fed, Q2 GDP and July Payrolls. This, combined with WSJ article by Fed’s Fisher who opined that the FOMC should consider tapering the reinvestment of maturing securities and begin shrinking the Fed’s balance sheet (note that Fisher’s opinion piece is written based on a speech he gave on July 16th) meant that USTs came under pressure overnight in Asia and in Europe this morning. There has been little notable equity futures action (for now: the USDJPY algo team gave it a good ramp attempt just before Europe open, and will repeat just around the US open despite Standard Chartered major cut to its USDJPY forecast from 110 to 106 overnight), although we expect that to change since today is the day when Tuesday frontrunning takes place with full force. We expect equities to completely ignore the ongoing deterioration in Ukraine and the imminent release of EU's own sanctions against Russia, as well as what is now shaping up as an Argentina default on July 30.

Let's take a look at the amount of settlements/fines from various banks and financial institutions around the world since the crisis.