A recession in Europe and slowing U.S. economic growth will constrain credit markets and weigh on U.S. bank stocks, according to analysts at Morgan Stanley.

On Monday the company cut its view on large-cap U.S. bank stocks to "in line" from "attractive," and cut 12-month single stock ratings and price targets across the sector. Most notably, Morgan Stanley cut its stock recommendation rating on Citigroup Inc. to "equal weight" from "overweight," trimming its stock price target by one-third, to $30 from $45. Citi's shares rose 6.4% in morning trade amid a broad equity market rally, to $25.15.

Morgan Stanley kept an "overweight" rating on JPMorgan Chase & Co., Wells Fargo & Co. and PNC Financial Services Group Inc.

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