) -- Moody's Investor Service on Monday warned of "very negative rating implications" for European countries, saying "the political impetus" for a solution to the debt crisis in the eurozone "may only emerge after a series of shocks."

The ratings agency said that continuing political uncertainty in Greece and Italy and "the recent Euro Summit statement on the conditional nature" of support programs had made the likelihood of multiple sovereign defaults "no longer negligible."

Moody's went further, saying that a series of defaults would "significantly increase the likelihood of one or more members not simply defaulting, but also leaving the euro area," which would "would have negative repercussions for the credit standing of all euro area and EU sovereigns."

In other euro-related developments,

The Wall Street Journal

on Monday reported that European officials were negotiating a new agreement to give Europe more direct power over euro-members' budgets, in order to persuade the European Central Bank to take more action to resolve the sovereign debt crisis.

In a report published Monday, Morgan Stanley downgraded several large U.S. financials and cut price targets for several others, citing the increasing likelihood of a European recession in 2012, slower U.S. growth and "EU banks' ¿1.5-2.5 trillion deleveraging."

Morgan Stanley downgraded the following U.S. financial companies:

  • American Express (AXP) - Get Report was downgraded from overweight or buy to a neutral rating of equal weight, with its 12-month price target cut by Morgan Stanley to $51 from $55.
  • Citigroup (C) - Get Report saw its rating lowered to equal weight from overweight, with its price target severely cut to $30 from $45.
  • For Bank of New York Mellon (BK) - Get Report, Morgan Stanley lowered its rating to underweight or sell from equal weight, while cutting the price target to $22 from $26.
  • Northern Trust (NTRS) - Get Report also saw its rating lowered by Morgan Stanley to underweight, with its price target cut to $41 from $44.
  • Morgan Stanley also lowered its rating for State Street (STT) - Get Report to underweight, cutting the Boston custody bank's price target cut to $40 from $48.

Morgan Stanley cut price targets for the following U.S. banks that all kept their overweight ratings:

  • Capital One Financial (COF) - Get Report saw its 12-month price target cut by Morgan Stanley to $55 from $60.
  • JPMorgan Chase's (JPM) - Get Report price target was cut to $40 from $49.
  • For PNC Financial Services Group (PNC) - Get Report, Morgan Stanley cut its price target to $63 from $65.
  • For Wells Fargo (WFC) - Get Report, the price target was cut by a dollar to $31.

Two banks had their ratings upgraded by Morgan Stanley on Monday, including


(BBT) - Get Report

, upgraded to overweight from equal weight, with a price target remaining at $29, and

U.S. Bancorp

(USB) - Get Report

, also elevated to overweight, with a price target increasing by two dollars to $31.


Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.