Wall Street bonus comeback to skip retail bankers

Good morning. Here's what happened overnight and what you need to know today.

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1.

Bonus turnaround: Wall Street bonuses are set to rise for the first time since 2021, except for retail and commercial banking, according to Johnson Associates. Investment bankers focusing on debt underwriting are projected to see the most significant bonus increases, with anticipated gains of 25%–35% over their 2023 incentive payments, while equity underwriters may receive increases of 15%–25%. Equity sales and trading bonuses could rise by up to 20%, while fixed-income trading payouts might see a 5%–10% boost. Asset and wealth management professionals could see bonuses increase by up to 12%, driven by market gains and fund inflows. Those in retail and commercial banking, however, face flat or declining bonuses, potentially down 5% amid slow lending and higher credit loss provisions. Private credit, the most sought-after sector for talent, is poised for a minimum bonus increase of 10%. The rebound comes after two consecutive years of declines following 2021’s record payouts. (Capital Brief)

2.

Trump picks: President-elect Donald Trump is expected to name Senator Marco Rubio as Secretary of State and has chosen Representative Michael Waltz, another leading China critic, as National Security Adviser, according to media reports. Billionaire investor John Paulson has withdrawn from consideration for Treasury Secretary due to financial obligations, with attention now shifting to fellow billionaire Scott Bessent. Meanwhile, projections from data provider Decision Desk HQ indicate that Trump's Republican Party will control both the US House and Senate, with Republicans holding at least 52 Senate seats. Trump’s cabinet of loyalists also includes Representative Elise Stefanik as US ambassador to the UN and former Representative Lee Zeldin to head the EPA. Texas Attorney General Ken Paxton has filed a request for special counsel Jack Smith to preserve records related to Trump’s cases as Smith considers winding them down before Trump’s inauguration. Meanwhile, a judge has delayed a ruling on overturning Trump’s conviction in his hush money case as prosecutors reassess their approach post-election. (FT)(NYT)(AP)(Reuters)

3.

National fund: Treasurer Jim Chalmers will announce nearly $1 billion in funding for states and territories to boost productivity, in a move that echoes Paul Keating's 1990s National Competition Policy (NCP). In a speech to the Australian Business Economists in Sydney, Chalmers will declare that there is “no higher priority for reform” than addressing productivity challenges, which have been a persistent issue. The planned $900 million National Productivity Fund will encourage states to pursue pro-competitive policies from a “menu of options,” potentially including streamlining commercial planning and zoning and cutting construction red tape. Chalmers will describe the potential benefits as “substantial, if not staggering.” The move follows December’s joint work with states to revitalise competition policies and aligns with the NCP that provided states approximately $600 million annually over a decade to reduce anti-competitive behaviour. (Capital Brief)

4.

Elliott’s bet: Elliott Investment Management disclosed it has built a stake worth over USD5 billion ($7.64 billion) in Honeywell International, its largest investment in a single stock, and is urging the North Carolina-based conglomerate to split its aerospace and automation units. The firm, now among Honeywell's top five shareholders, asked Honeywell’s board to consider the proposal, projecting such a split could yield a 51%-75% share price increase over two years. Valued at USD146 billion, Honeywell last month reported softer demand for its smart-energy products and cut its full-year sales forecast. Elliott said the conglomerate structure has hindered the industrial giant’s operational and financial performance, citing its share underperformance against peers and the broader market over multiple time horizons. Honeywell’s stock, up 7.4% year-to-date, rose as much as 7.78% to USD242.77 each following the news. (Capital Brief)

5.

Climate clash: Europe’s largest energy company, Shell, won its appeal against a 2021 ruling by The Hague District Court, which required the company to reduce carbon emissions by 45% by 2030 from 2019 levels. The Dutch Court of Appeal annulled the decision, stating there was "insufficient consensus in climate science" to impose a specific reduction target on a single company. While the court said Shell has an obligation to reduce emissions, it emphasised governments bear primary responsibility for ensuring human rights protection. The ruling coincided with the COP29 climate summit in Azerbaijan, where discussions have been dominated by Donald Trump’s re-election victory, amid fears he will again pull the US out from the Paris agreement after he campaigned with the slogan “drill baby drill”. At the summit, Exxon Mobil's CEO, Darren Woods, urged Trump not to withdraw from the Paris climate accord, citing business uncertainty. China, meanwhile, called for the US to engage in “constructive dialogue” to tackle climate change in future. (Capital Brief)(Hague Court of Appeal)(Reuters)(FT)(NYT)(WSJ)

6.

Trade angst: Prime Minister Anthony Albanese will travel to Peru today for the APEC summit, followed by the G20 in Brazil, amid concerns over potential tariffs under President-elect Donald Trump’s administration. Albanese rejected opposition suggestions he add a stop in Florida to see Trump, instead showing confidence in their relationship noting a recent call where he claimed Trump said the countries would have a “perfect friendship.” Albanese also reportedly indicated his government would use former Prime Minister Malcolm Turnbull’s argument that Australia has a trade surplus with the US, to secure exemptions from Trump’s threatened tariffs. Peter Dutton raised doubts about Labor’s ability to negotiate the exemptions due to past criticisms of Trump by figures like Ambassador Kevin Rudd. Officials expect Albanese to speak with Chinese President Xi Jinping at the APEC gathering, as Treasurer Jim Chalmers warned that a US-China trade war could impact Australia's economy, which relies heavily on trade. (AFR)(SMH)(The Australian)

7.

German elections: Germany’s main parties have agreed to hold snap elections on 23 February. Chancellor Olaf Scholz will propose a confidence vote on 16 December, after facing pressure from the opposition Christian Democratic Union (CDU) to advance the timing from mid-January. The government collapsed last week when Scholz dismissed finance minister Christian Lindner over his refusal to suspend the debt brake, which would have enabled more aid for Ukraine. Despite previous doubts and low approval ratings for Scholz, Social Democratic Party (SPD) leaders are now rallying around him, viewing his move as decisive, although some SPD members continue to suggest defence minister Boris Pistorius as a stronger candidate. Scholz remains the likely choice. Comparisons have been drawn to US Democrats’ unsuccessful attempt to change candidates ahead of elections. (FT)

8.

Robotaxi unleashed: Alphabet’s Waymo has made its autonomous ride-hailing service available to the general public in Los Angeles, after eight months of limited access to selected users from a waitlist of nearly 300,000. Waymo began as a secret project at Google in 2009 and launched its first US driverless taxi service in Phoenix in 2020, later expanding to San Francisco. The company raised USD5.6 billion ($8.58 billion) last month, supported by Alphabet, Andreessen Horowitz and T Rowe Price, and now facilitates over 150,000 weekly rides. Competitor Tesla is planning a “Cybercab” launch in California and Texas next year, and Amazon’s Zoox is preparing for expansions in Las Vegas and San Francisco next year. Elsewhere in tech news, the EU ordered Apple to end geo-blocking practices on services like the App Store, Apple Arcade, Music, iTunes Store, Books and Podcasts. Apple has one month to propose how it will address the concerns. (Reuters)(AP)