By Marc Jones
LONDON (Reuters) - Money has flowed into emerging-market bond funds for six straight months and global equity funds attracted another $10 billion last week, Bank of America Merrill Lynch said, as it gave its latest warning that the rally looks set to end.
BAML's analysts said in their weekly "Flow Show" roundup of capital movements that their "Bull & Bear" market temperature gauge was nearing the red zone and that asset prices would top out in the coming months.
But for now it has been "another 'risk-on' week: $9.9 billion flowing into equities, $6.6 billion into bonds, $0.6 billion out of gold," BAML's analysts said in the note published late on Thursday to its clients and to media on Friday.
A breakdown of the numbers, which are measured from Wednesday to Wednesday, showed inflows into emerging-market debt funds for 26 straight weeks and into emerging-stock stocks funds for 19.
And while U.S equity funds saw a sixth week of outflows, European stocks funds gained for 17 of the past 18 weeks and Japanese stock funds for six of the past seven weeks.
By style, U.S. "value" funds have seen outflows 13 of the past 14 weeks ($1.5 billion this week), big outflows from U.S. growth funds ($3.1 billion this week) and the largest outflows from U.S. small caps in three weeks ($1.2 billion this week).
By sector for the week, there were inflows to financials ($1.3 billion), tech ($0.4 billion), consumer ($42 million); outflows from materials ($0.3 billion), energy ($0.6 billion, the largest in 16 weeks), utilities ($0.2 billion) healthcare ($26 million) and real estate ($0.5 billion).
"We have pencilled in an autumn top (for assets prices)," BAML said, adding positioning was becoming "more consistent" with that possibility. The "Bull & Bear" indicator was now at 7.6 - edging towards the "sell" signal of 8.
The analysts said the trigger was further strong inflows to high-yield, emerging-market debt and active equity funds and a drop in private-client cash levels to record lows.
An August "crack in markets" would require a further drop in the dollar index <.DXY> to 90 - it was at 93.7 on Friday - coinciding with unambiguous U.S labor and consumer weakness and a flatter U.S. yield curve.
An early warning would be an end to the gains by high-yield funds. So would dwindling gains by equity growth leadership funds, such as funds focused on emerging-market internet and e-commerce.
BAML also said there was a "contrarian" signal to go into oil and energy after funds in that area saw their largest outflows in 16 weeks. There had also been a big redemption of energy exchange-traded funds, and private-client allocation to energy was at a record low.
(Reporting by Marc Jones, editing by Larry King)