Es a merging equities snapped a nine-day winning treak after disappointing US corporate results nd plans by Venezuela's state oil company to sell $3 billion in debt weighed on investors.

A third consecutive monthly rise in US industrial output in September pushed oil to a one-year high above $78 a barrel, but the surge in crude prices was not enough to lift commodity-linked regional markets in Latin America.

Flagging US consumer confidence dulled investor appetite for riskier assets, while poor results from General Electric and Bank of America suggested the road to economic recovery in the United States may still be bumpy.

The MSCI emerging equity index slipped 1 per cent, yet for the week rose about 2.1 per cent. The index, which has gained almost 71 per cent this year, remains at 14-month highs. The Brazilian Bovespa index fell 0.75 per cent, while the Mexican IPC index slid 0.94 per cent. Warnings emerged that the red-hot rally in emerging equities may be due for a pullback of 10 to 15 per cent.

Schroders Investment Management, which oversees more than $20 billion in developing market assets, said a correction is likely in the next month or two. Michael Gavin, emerging market strategist at Barclays Capital, said global markets not unsurprisingly pulled back after a strong US equity rally earlier in the week.

The Dow and S&P 500 indices finished the week up more than 1 per cent. "Emerging markets are pretty much following global markets, and specifically US markets," said Michael Gavin, emerging market strategist at Barclays Capital. "So, the relevant question is why this pause today in global markets on the back of not much news." Plans by Venezuelan state oil company PDVSA to offer $3 billion of bonds caused a bit of `indigestion' on the emerging debt market, Gavin said. There are concerns among investors that the supply of bonds in Venezuela may be stretched.

"You have some pretty major issuance by Venezuela, which has put some pressure on the tail end of the emerging market debt markets. It's an awful lot of risk to be absorbed by guys who are owning Ukraine, Venezuela, Argentina," Gavin said.

To be sure, there remains a general upward trend in emerging markets, he said.

Global emerging market equity funds absorbed $2.1 billion in fresh money during the past week, a record for 2009, and Latin American stock funds had their best week since May, according to fund tracker EPFR.

However, money market and US equity funds saw redemptions, hinting clearly that investors are moving out of US stocks into emerging markets.

Investors withdrew $28.1 billion from money market funds in the week ending October 14, according to EPFR data. US equity funds lost $3.49 billion during the same period even as the Dow Jones Industrial Average moved back to its 10,000 level.

Investors poured money into emerging market equity funds as "hopes of increased US and European demand for commodity and other emerging markets export (were) bolstered by a good start to the thirdquarter earnings season and the latest Chinese trade numbers," EPFR said. Heavy inflows were seen in funds specialised in Bric countries -- Brazil, Russia, India and China. Equity funds dedicated to Bric countries or Russia alone saw their largest weekly inflows for the year, while funds dedicated only to Brazil or to China had their second-best week of the year, the firm said. Last week, benchmark stock indices fell in Colombia and Peru, but rose in Chile.

Emerging market debt funds recorded their largest weekly inflows since EPFR started tracking them in 2001. Weekly inflows to emerging bond funds have averaged nearly $900 million since the second week of September, EPFR said. Most currencies in the region ended slightly lower.

The bulls are not in a mood to loosen control on the market and even the smallest bit of positive news is making the market move upward sharply. This kind of market movement is an indication that liquidity is still very high and there is much more steam left.