Morgan Stanley

Yesterday's exuberant equity market reaction has been largely defined by the mainstream media as driven by WSJ Hilsenrath's 'confirmation' that Yellen will keep the uber-dovish phrase "considerable time" in the FOMC statement today. So, we wonder, why did the Fed-whisperer, after markets had closed last night, issue a quasi-retraction of his prediction explaining that instead of some prohetical "I just know" statement, it was a "best guess," as he concluded, "will the Fed take these steps? Only the people in the room know that. The rest of us will see Wednesday afternoon." It appears the sell-side disagrees with him on the language...

What if it had gone differently? What if, six years ago, in the throes of the financial crisis, the political leaders in D.C. had decided that enough was enough, and they were going to seize the opportunity to make real and meaningful positive changes?

• Thank you market Chief Risk Officer Bernanke/Yellen: Calpers to Exit Hedge Funds, Divest $4 Billion Stake (BBG)
• World stocks hit one-month low, caution ahead of Fed (Reuters)
• U.S. Efforts to Build Coalition Against Islamic State in Iraq, Syria Are Hampered by Sectarian Divide (WSJ)
• Time to throw away some more good money: Sears Borrows $400 Million From Lampert’s ESL Investments (BBG)
• Wildfires rage in California drought, hundreds forced to flee (Reuters)
• United Offers $100,000 Buyouts to Flight Attendants (BBG)
• Biggest Banks Said to Overhaul FX Trading After Scandals (BBG)
• You mean you have to pay? Administration threatens to cut off ObamaCare subsidies to 360,000 (The Hill)
• RBS Said to Dismiss Most of Team Overseeing Central Europe Debt (BBG) they will be hired by the ECB

Investors pulled $27 billion out of UK financial assets last month - the biggest capital outflow since the Lehman crisis in 2008 - as concern mounted about the economic and financial consequences if Scotland left the UK, according to Reuters. Furthermore, Morgan Stanley said daily equity flow data pointed to "some of the largest UK equity selling on record."

• Russia faces new U.S., EU sanctions over Ukraine crisis (Reuters)
• Glasgow pulls no punches in welcome to 'Save the Union Express' (Guardian)
• Pound Seen Tumbling Up to 10% on Scottish Yes Vote (BBG)
• Moscow stifles dissent as soldiers return in coffins (Reuters)
• Ukraine's leader sees no military solution of crisis, eyes reforms (Reuters)
• Venezuela Threatens Harvard Professor for Default Comment (BBG)
• Australia Raises Terror Alert to Highest Level in a Decade (BBG)
• Activist Investors Build Up Their War Chests (WSJ)

• Obama orders U.S. airstrikes in Syria against Islamic State (Reuters)
• Obama Relying on Mideast Allies to Counter Islamic State (BBG)
• Scotland Nationalists Claim U.K. Oil in 40-Year Campaign (BBG)
• Scottish Polls Embolden Catalans Pushing Rajoy for Vote (BBG)
• Royal Bank of Scotland: RBS will leave Scotland if voters back independence (Guardian)
• Most Hedge-Fund Managers Are Overpaid, Unigestion Says (BBG)
• China Inflation Softens to Four-Month Low (WSJ)
• Munger Hosts Groupies, Mocks Wall Street, Praises Buffett (BBG)

Today's markets exist in an Oz-like, fantasy world. For 5 years now, stock and bond prices have risen like Dorothy's balloon, with hardly a puff of downdraft to spoil the fun. Everybody likes higher prices, so let's have them always go up! Forever! But what if...

• British PM begs Scots: Don't rip apart our UK 'family of nations' (Reuters)
• Obama has become Bush: Obama’s Task: Rally U.S. Public, Allies in Terror Fight (BBG)
• Alibaba's record IPO covered after first few roadshow meetings (Reuters)
• Ferrari chairman Luca Di Montezemolo to quit after 23 years (BBC)
• Combat Reversals Pressure Assad (WSJ)
• Top LBO Fund Investors Pile on Leverage to Boost Returns (BBG)
• BOJ's Iwata upbeat on economy, unfazed by post-tax hike slump (Reuters)
• Carney Can’t Escape Housing as Debt Colors BOE Policy (BBG)
• Detroit Clears Crucial Hurdle on Bankruptcy (NYT)

• Showtime for Apple: Big phones, smart watches and high expectations (Reuters)
• Bank of England Gov. Mark Carney Signals Spring Rate Rise (WSJ)
• Quebec Shows Scots Question Returns Even If Answer Is No (BBG)
• Hush money with a 9 year vesting period: Ex-SAC Fund Manager Martoma Sentenced to Nine Years in Prison (BBG)
• Dreams on hold, Brazil's 'new middle class' turns on Rousseff (Reuters)
• Fed to Hit Biggest U.S. Banks With Tougher Capital Surcharge (WSJ)
• Egypt court sentences Brotherhood leader, cleric to 20 years in jail (Reuters)

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.

• Scotland split jitters send sterling to 10-month low (Reuters)
• S&P 500 Beating World Most Since 1969 Doesn’t Spark Flows (BBG)
• Happy ending guaranteed: Vietnam building deterrent against China in disputed seas with submarines (Reuters)
• China Posts Record Surplus as Exports-Imports Diverge (Bloomberg)
• Russia, U.S. to hold talks on 1987 arms accord (Reuters)
• Halcon’s Wilson Drills More Debt Than Oil in Shale Bet (BBG)
• Deadly Disappointment Awaits at Ebola Clinics Due to Lack of Space (WSJ)
• Latinos furious at Obama on immigration delay, vow more pressure (Reuters)
• Japan GDP Shrinks at Fastest Pace in More Than Five Years (WSJ)

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?

• Euro left reeling after ECB's liquidity splurge (Reuters)
• Coalition Emerges to Battle Islamic State Militants (WSJ)
• Ukraine Gas Chief Takes on Gazprom in Race With Winter (BBG)
• Nato leaders fail to agree spending targets (FT)
• JPMorgan Had Exodus of Tech Talent Before Hacker Breach (BBG)
• Mercedes-Benz Sales Rise Despite Weak German Demand (WSJ)
• Secret Network Connects Harvard Money to Payday Loans (BBG)
• ICE looks to crack financial data market (FT)

• Global stocks bounce on sign ECB could launch ABS program (Reuters)
• Putin unveils Ukraine ceasefire plan, France halts warship (Reuters)
• Poroshenko Flummoxes Investors With About-Face on Truce (BBG)
• No Free Lunch for Companies as IRS Weighs Meal Tax Rules (BBG)
• Turkey Struggles to Halt Islamic State 'Jihadist Highway' (WSJ)
• Lego Becomes World's Largest Toy Maker on Movie Success (WSJ)
• U.N. says $600 million needed to tackle Ebola as deaths top 1,900 (Reuters)
• Goldman Sachs Named 'Stabilization Agent' for Alibaba Stock Offering (WSJ)