LAST week bore witness to a market sell-off that was amplified by a big fall in the Federal Reserve Bank of Philadelphia survey.

It came against a backdrop of continuing sovereign debt worries in Europe and the announcement of new plans in the US for a further round of Operation Twist (its quantitative easing programme).

If all this sounds a little familiar it’s because it is. The events of last week echoed those of last August and September to a striking degree. Superstitious investors might also note that the level of the S&P last week was almost exactly where it was when the sell-off started too.

But just as back then, we expect US economic indicators – and eventually the markets too – to regain their poise. If anything, a ‘double-dip’ in the US economy looks a little less of a risk now.

In contrast to last August, the leading indicator index has continued to rise even as the Philly Fed survey (and others) has faltered, led by a recovery in building permits and the consumer spending backdrop, which now looks much more supportive.

That said, while we were not surprised at the US Federal Reserve’s (Fed) decision to ‘Twist’ again (like they did last summer), we’re not especially encouraged by it, nor would we recommend UK investors trying specific trades to try and take advantage of the latest tranche of US government-sponsored liquidity.

This is because by selling more short-term Treasuries (with maturities of up to three years) to buy more longer-dated ones (six to 30 years), the Fed can perhaps cut the absolute cost of mortgages, thereby offering some support to the housing recovery in the US.

Apart from this, the impact on bond markets is unlikely to be big enough for private investors in the UK to exploit, while the evolving euro crisis is currently a far bigger driver of bond markets in any case. If the US economy is being held back then it’s not because long-term interest rates are a few points too high, more likely it’s because business confidence has stalled in the face of the latest slump in global risk appetite.

Meanwhile, although the results of the Greek election were as positive for markets as could have been hoped, the euro crisis is, of course, still with us. As we continue to highlight, Spain, not Greece, is now the key, and we expect the authorities to eventually circle the wagons around the Spanish banks in order to contain the contagion.

Remember that a 7% yield on Spain’s 10-year sovereign bond is not the financial Rubicon that many fear ... indeed, last week it was crossed and re-crossed again. This week’s European summit will be watched carefully by the markets – and by the European Central Bank (ECB) – for further evidence that the politicians ‘get it’ ... that is, the need for greater long-term fiscal and banking union, and for budgetary and structural reform in the peripheral economies.

Of course, history doesn’t rhyme in every respect, and the eventual outcome doesn’t have to echo last year’s happy ending.

Indeed, in our portfolios we have reduced our short-term weightings in risky assets such as equities in anticipation of recent volatility continuing through the summer.

But we still feel that neither the global economy nor the euro banking system will meet with a serious accident in 2012, and our strategic investment advice still favours those risky assets.

:: Andrew Miller is regional office head of Barclays Wealth in Newcastle