1) higher borrowing cost (wider credit spread) which has two implications

1.1 less M&A, LBO. M&A and LBO has been helpful in supporting the stock market

1.2 tougher biz environment for most business which is also negative


2) i-banks prefer, and most of them have, lean balance sheets. If they encounter major losses bcuz of their exposure to Credit related instruments, there is a posibility that they have to liquidate other instruments like investments in high-quality stocks or carry trades in order to get more cash to meet all cash outflow obligations. This will add further downside pressure to stock market, especially the emerging market