Trading frenzy boosts brokerages and Wall Street banks

Today’s agenda: HSBC’s retail banking review; Trump invites Xi to inauguration; SEC sues Cantor Fitzgerald; Big Read on Britain’s housebuilding woes; and from FT Magazine, the El Husseinys’ fall

Good morning. We end this week with a look at how Donald Trump’s election win has sparked a trading frenzy, as expectations for sweeping policy changes have added fuel to a US stock rally.

How big is the jump? Trading volumes in US equities rose 38 per cent in November from the same month in 2023, reaching levels not seen since the meme stock craze of early 2021, according to exchanges operator Cboe Global Markets. Trading activity has been boosted more broadly by a strong year in US markets, with Wall Street’s S&P 500 index rising 27 per cent year to date to a series of record highs.

Who is profiting? The jolt of trading activity has benefited Wall Street banks and brokerages preferred by retail clients. JPMorgan Chase’s retail banking chief said its trading revenues for the final three months of 2024 were set to rise more than 15 per cent from a year earlier, triple the 5 per cent forecast by analysts prior to Trump’s win. Citigroup anticipates its fourth-quarter trading revenue to rise as much as 19 per cent from a year ago.

Robinhood said equity trading volumes grew 16 per cent between October and November, while Interactive Brokers said its daily average revenue trades rose 17 per cent. Shares in both brokerages have far outpaced the S&P 500 in the past three months. Here’s more on the surge in trading.

• M&A: Dealmakers are gearing up for a robust comeback under Trump, but his antitrust appointments suggest a more complex reality.

Here’s what we’ll be watching in the days ahead:

• Economic data: The EU has October industrial production and third-quarter labour figures, while the UK reports GDP estimates for October. The Bank of England and Ipsos publish their inflation attitudes survey, while GfK has its consumer confidence survey for Britain.

• Georgia: The country holds elections for a new president tomorrow, amid a political crisis over EU accession and a Russia-leaning government.

• Middle East: Syria’s vital border crossing with Jordan is set to reopen on Sunday, the country’s de facto finance minister told the Financial Times.

• Nasdaq 100: The index announces its annual reshuffling of constituent stocks today.

Five more top stories

1. HSBC is reviewing its retail banking operations outside the UK and Hong Kong, a move that could see it substantially scale back operations in some countries as it seeks further cost cuts. Mexico is one of the markets under review, according to people familiar with the discussions. Read the full story.

2. Donald Trump has invited Xi Jinping to his inauguration next month in an early sign that the US president-elect intends to resume the high-level engagement with the Chinese leader that marked his first term. Trump’s incoming White House press secretary said he wanted to create an “open dialogue” with countries that were American adversaries.

3. The US securities regulator has sued Cantor Fitzgerald, the brokerage led by Donald Trump’s commerce secretary nominee Howard Lutnick, for allegedly making misleading statements to investors in the lead-up to two public offerings that raised $750mn. The Securities and Exchange Commission said the brokerage had agreed to pay a $6.75mn penalty without admitting or denying liability.

4. Exclusive: The UK chancellor has dismissed calls for an HS2-style line north of Birmingham, saying she will not give “false hope” to proponents of building a new railway. Rachel Reeves told the FT that the government’s transport focus was “connectivity within the north of England” rather than on the West Coast mainline. Jennifer Williams has more from Manchester.

5. The European Central Bank cut interest rates by a quarter-point to 3 per cent yesterday as it watered down its hawkish language and warned that growth would be weaker than it had previously forecast. Analysts say the fourth reduction in borrowing costs since June, which brings the ECB’s benchmark rate to its lowest level since March 2023, has opened the door to further cuts.

How well did you keep up the news this week? Take our quiz.

The Big Read

The UK dreams of kick-starting a housebuilding boom, but the construction sector relies heavily on migrants to plug a skills gap. The shortage could present a political dilemma for the Labour government, which has promised to bring down net migration. Can the country find enough workers to “get Britain building”?

We’re also reading . . . 

• The El Husseinys’ fall: A prominent family made a fortune working for autocrats. Who was really to blame when everything fell apart?

• Crypto’s golden era: With Donald Trump promising a friendlier approach to the industry, here are the modern tycoons who stand to benefit.

• Poster child of DEI: The president-elect may be bad news for diversity, equity and inclusion, but his White House picks demonstrate its benefits, writes Stuart Kirk.

Chart of the day

The pound hovered close to its highest level against the euro since the Brexit vote as the European Central Bank cut interest rates and investors bet on diverging fortunes for the UK and Eurozone.

Take a break from the news

From vineyards in the Andes to rhinos in Zimbabwe, writers including Pico Ayer and historian William Dalrymple share their travel discoveries — and disappointments — of 2024.