The U.S. stock markets have by and large been decoupled from the woes of Europe most of this year, as well as the slowing of growth in the key markets of China, India, and in many parts of South America.  While “Sell in May and go away!” looks less evident this year, there are some new concerns brewing over the European Union and its banking sector.

S&P actually raised its rating on Greece this morning, but this was a technical upgrade rather than any real improvement.  The fears elsewhere are outweighing the hopes right now as French and Dutch austerity measures are now being fought in the political scene.  Even more fresh data from various purchasing managers readings from France, Germany, Spain, and elsewhere are only adding fuel to the fire that the recessionary climate in Europe is worse than many have hoped.

Greece saw something highly unusual today: A RATINGS AGENCY UPGRADE!  After the distressed debt exchange, Standard & Poor’s removed the SD rating (selective default) up to a rating of “CCC” and said that the long-term outlook is STABLE.  The short-term foreign and local currency sovereign credit rating was raised to “C” from the “SD” rating and the outlook is now STABLE as well.  Unfortunately this is of no help to National Bank of Greece SA (NYSE: NBG) with its ADRs down 4% at $2.19 in New York trading.

More fears are coming up in Spain as the bank leverage is high.  Banco Santander, S.A. (NYSE: STD) is down almost 6% at $6.01 in New York trading, and the prior 52-week trading range was $6.08 to $12.48. Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) is down 5.5% at $6.45 and shares briefly dipped to a 52-week low today under the prior 52-week range of $6.43 to $12.96.

Can you leave Ireland out?  No, and the ADRs of The Bank of Ireland (NYSE: IRE) are down 4.8% at $5.92 in low-volume trading mid-day in New York.

Deutsche Bank AG (NYSE: DB) is down 4.5% at $452.16 in New York trading of its ADRs.

As Switzerland is being considered a haven, there is a mixed reaction. UBS AG (NYSE: UBS) is up 1.3% at $12.84, while Credit Suisse Group (NYSE: CS) is down 4.2% at $22.51 in New York ADR trading.

England is certainly not in the Euro, but the banks there have deep ties to dealings in Europe.  Barclays PLC (NYSE: BCS) is down 4.4% at $13.88 and Royal Bank of Scotland Group plc (NYSE: RBS) is down 2.4% at $8.02 in New York ADR trading.

JON C. OGG

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