Economic releases were somewhat mixed to soft in the developed countries, but concerns about the emerging countries weighed heavily on the markets across the globe. China's Flash PMI for Manufacturing dropped a point into the contraction zone, putting pressure on currencies, equity markets and debt from those regions; the Chicago Board Options Exchange Emerging Market ETF Volatility Index rose 40 percent last week. Government Bond yields fell and credit spreads widened, especially those for emerging market debt. The U.S. dollar fell against the Pound, Yen and Euro. Oil prices rose and natural gas prices surged on the cold weather vortex barreling its way through the Midwest and Eastern U.S. states.

Perspective:

This week shows the extent to which the world's economies are connected. China's PMI dipped just below 50, to 49.6, and equity markets around the globe sold off. Yet the emerging market concerns go beyond the second largest economy in the world. Political unrest continues in the middle east. Turkey's government is under corruption charges; this week the Turkish lira fell to a record low when its Central Bank made a failed unscheduled intervention. Brazil's Ibovespa fell for the fifth time in the last six sessions. Argentina's reserves have fallen to a seven-year low. South Africa's rand fell below 11 per dollar for the first time since October of 2008. Even my wife's three-week stint in India failed to lift that economy; traveling with the Gandhi Institute was good for the soul, but did not do much to lift the economy.

Since we are so interconnected, this year's Camden Conference, The Global Politics of Food and Water, is not just timely but critical. In his book, Full Planet, Empty Plates, Lester Brown argues that the world population is growing while the available land and water to grow crops is shrinking. Brown contends that we need to secure our security, not with more guns, but with more sensible policies that can address the coming shortages of food and water.

Economic Releases:

Weekly Initial Jobless Claims remained low, at 326,000 the week of Jan. 18. The four-week moving average of Claims (blue in the chart) eased lower to 331,500. On the other hand, Continuing Claims (red in the chart) rose 34,000 to 3.056 million. The chart also shows that Claims have declined significantly from the Great-Recession’s highs.

U.S. Existing Home Sales (green in the chart below) inched higher to 4.87 million in December after a weak November report.

Other Economic Releases

In other U.S. releases, the Markit Purchasing Managers' Flash Manufacturing Index for January slipped a half point, to 53.7; although it remained in the expansion zone (above 50), the release disappointed since the consensus was for a gain.

The European PMI Markit Flash report for January gained more than expected; the Composite PMI rose to 53.2, the Manufacturing PMI rose to 53.9, and the Services PMI rose to 51.9. Germany's PMI's rose as well, to 55.9, 56.3, and 53.6 for Composite, Manufacturing and Services. Germany's Zew Survey for January for Current Conditions rose to 41.2, but for Business Expectations slipped to 61.7. France's Markit PMI's rose to 48.5, 48.8, and 48.6 respectively, but remained in the contraction zone. The UK's Labour Market report showed improvement in December; the Unemployment Rate fell two ticks to 7.1%.

The Bank of Japan met and, as expected, kept rates and financial asset purchases unchanged while noting that the economy is recovering moderately. The big disappointment was China's flash PMI Manufacturing Index, which fell a point to 49.6, into the contraction zone.

Equities Markets:

Equity markets fell across the globe on emerging market economic concerns. Most bond markets rose, but the ML Emerging Market Bond Index posted a slight negative return for the week.

Bond Markets:

Government Bond markets were the beneficiaries of the equity market sell-offs. Bond yields fell across the globe. Credit spreads bucked the trend by widening, especially those in emerging markets.

Currencies & Commodities:

The U.S. dollar gained against the Looney, but lost ground to the Yen, Pound and Euro this week. Natural Gas surged as the vortex of cold weather spread down from Canada and into the central and eastern states. Oil and gold prices were also higher on the week.

Who is John Davidson?

John W. Davidson, CFA, started writing these Comments more than a decade ago as a personal discipline when he was promoted to from portfolio manager to chief investment officer and CEO.

Most recently, he was the president of PartnerRe Asset Management Corporation, responsible for the management of PartnerRe's invested assets, which grew from $4 billion to $12 billion during his tenure. After joining PartnerRe in the fall of 2001, he hired the staff, built the trading floor and created the infrastructure to manage both fixed income and equity assets internally. He retired from PartnerRe at the end of 2008 and moved to Maine, where he focused on board work.

He has more than 35 years of industry experience, including positions with investment management responsibility for separate institutional accounts, mutual funds, trusts and insurance assets. Prior to joining PartnerRe, he served as president and chief executive officer of two other investment management companies. For various companies he has held positions as chief investment officer, chief economist, head of fixed income and portfolio manager. As a portfolio manager, Davidson managed and traded U.S. Government Securities as well as futures and options on fixed income instruments.

His real world experience is backed by a strong academic foundation, which includes earning a Master of Business Administration in finance and a Master of Arts in mathematics from Boston College, as well as a Bachelor of Arts, cum laude, in economics from Amherst College. He holds the professional designation of chartered financial analyst.

His experiences and credentials have brought him to the public as a television commentator and conference speaker. In addition to his frequent past appearances on CNBC, CNNfn, Bloomberg TV and Yahoo FinanceVision, he appeared as a special guest on Wall $treet Week with Louis Rukeyser. Reuters, Bloomberg and other business press services have quoted his views on the market. He has taught CFA preparation programs, as well as other courses offered by the Stamford and Boston CFA Societies, and the National Graduate Trust Officers' School.

Davidson is a natural leader in both his professional and personal life, having developed those skills early in his career as a naval officer. He spent three years on active duty, which included a year on the rivers of Vietnam, and 24 years in the Naval Reserve, from which he retired as a captain in 1994.

Davidson is treasurer and board member of the Camden Conference. He is also on the investment committee of the Pen Bay Health Foundation. He serves as an independent trustee for mutual funds.

In his leisure time, he is an active sailor, tennis player and skier. With his wife, Barbara, he renovated a 100+-year-old home in Camden, where they enjoy spending time with their two golden retrievers and having visits from their five children. He can be reached at jwdbond@me.com.