Shanghai, Greece set off global stocks rout but US escapes

The US Tuesday largely escaped a global rout that pounded equities from Shanghai to Buenos Aires on worries ranging from tightened Chinese lending rules to another bout of eurozone turmoil.
The red tide on trading screens began in Asia, continued in Europe and reached as far as Argentina, where stocks fell 7.22 percent on gloom over the oil market.
But US equity markets largely bucked the trend after the Dow initially fell more than 200 points in early trade. US investors have shown a strong buy-the-dip conviction all year and that trend continued Tuesday.
"It's a further demonstration of the belief that the US market remains the best option for equity investments," said Michael James, managing director of equity trading at Wedbush Securities.
"Pullbacks will continually be bought until that's proven not to work."
The blue-chip Dow index finished just 0.29 percent lower, while the tech-rich Nasdaq advanced a healthy 0.54 percent and the S&P 500 slipped a scant 0.02 percent.
Analysts see the US strength as testament to the comparatively strong economic outlook in the world's biggest economy.
In its preview for markets in 2015, Bank of America projected another good year for US stocks. It projected the S&P 500 would rise to 2,200.
"Robust US economic growth continues to outpace the rest of the world, boding well for US employment, wages and housing in 2015," the bank said.
-Slump hits China, Europe-
By contrast, Tuesday's performance in Asia and Europe pointed to greater uncertainty about those regions.
Chinese equities were battered, with Shanghai's equity market falling 5.4 percent.
The drop came after Chinese authorities announced a new rule late Monday tightening the use of corporate bonds as collateral for short-term financing -- a move analysts said will curb investors' ability to trade on margin.
Tokyo dropped 0.68 percent, snapping a seven-session winning streak, while Sydney tumbled 1.68 percent as energy shares were punished.
Greek stocks plunged 12.8 percent -- the largest one-day drop in 27 years -- after the government unexpectedly brought forward a high-stakes presidential vote.
The move raised questions over the recovery plan for the country which nearly caused the breakup of the eurozone.
"It seems like old times today -- and not the good old times," Briefing.com analyst Patrick O'Hare said of the latest Greece news.
London's benchmark FTSE 100 fell 2.14 percent, Paris's CAC 40 sank 2.55 percent and  Frankfurt's DAX 30 shed 2.21 percent.
"Political uncertainty in Greece acted as one of the main drivers for the sell-off in Europe after the Greek government brought forward the presidential election to next week," said Sucden Research analyst Kash Kamal.
Among individual stocks, Tesco shares were the biggest loser in London, sinking 6.6 percent to close at 174.90 pence after the big supermarket group sharply reduced its profit forecast.
Tesco said its trading profit "will not exceed £1.4 billion" ($2.2 billion, 1.8 billion euros) in its financial year to February 2015. Analysts' consensus had been for £1.94 billion as Tesco undergoes changes to its business triggered by a fraud probe.
In the US, telecom giants AT&T, Verizon and Sprint suffered big drops after Verizon warned that fourth-quarter earnings would be pressured by a "highly competitive and promotion-filled" business environment.
Some leading banking stocks also retreated after Citigroup announced a $3.5 billion charge in the fourth quarter due to legal and restructuring costs and Bank of America also signaled lackluster fourth-quarter trading revenues.