“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” — Warren Buffett

1. PBOC drains $7.9B from financial system — the People’s Bank of China has drained $7.9B from the country’s financial system by selling 48B yuan in repurchase contracts, the first such transaction since June of 2013. The PBOC made the tightening move after the recent data showed that aggregate financing soared to a record 2.58T yuan ($425B) in January from 1.23T yuan in December despite the bank’s attempts to rein in lending.
2. Fed Reserve Sets Rules for Foreign Banks — the Federal Reserve has passed regulations for foreign banks on capital, debt levels and annual “stress tests” that could force 15-20 of them to raise billions of dollars in capital. Overseas banks with U.S. assets of over $50B would have to form special holding companies in the country and maintain higher capital buffers than other nations require.
3. U.S. Household Debt Begins to Rise Again — NYTimes, total household debt in the U.S. increased 2.1 percent, the largest quarterly increase since before the recession, according to a new report from the Federal Reserve Bank of New York. Mortgages rose by $16B on year to $8.05T following four consecutive years of declines. Retail analyst David Strasser says “We’re still over-leveraged by any historical measure.”
4. Chinese factory activity contracts at faster pace — China’s flash manufacturing PMI tumbled to a seven-month low of 48.3 in February from 49.5 in January and missed consensus of 49.4. The sub-indexes for output, new orders, new export orders and employment contracted. The fall in overall PMI adds to other data that provides a mixed picture of China’s economy. The latest figures may have been hampered by the Lunar New Year holiday.
5. Latest FOMC minutes — in the latest FOMC meeting chaired by Ben Bernanke, a few policy makers saw a chance of rate hikes “relatively soon.”

The week ahead — Economic data from Econoday.com: