By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- European stocks failed to gain traction on Thursday, bogged down by bank-related losses in London, slightly weaker-than-expected U.S. growth data and a big drop for heavyweight Hennes & Mauritz AB on earnings disappointment.

The Stoxx Europe 600 index flattened out at 331.12, though it had seen slight gains during the session. The benchmark was held back in part by losses among U.K. equities.

The pullback in European stocks came alongside a lower open for Wall Street, as the U.S. government upgraded fourth-quarter economic growth to 2.6% from 2.4%, largely on the back of higher spending on health care. At the same time, an increase in business investment was lower than previously estimated.

The finance sector was in focus after the U.S. Federal Reserve on Wednesday rejected the capital plans for the U.S. arms of British multinational HSBC Holding PLC , Spain's Santander and Royal Bank of Scotland Group . The Fed also nixed Citigroup Inc.'s (C) plan, saying the firm didn't make sufficient progress in improving risk-management and control practices.

In London, shares of HSBC shed 0.7%, and Royal Bank of Scotland shares fell 1.4%. Santander shook off the news, though rising 0.4%.

Another big mover was H&M , dropping 3.8% after one of Europe's biggest retailers posted a 7.8% rise in profit, but warned costs in 2014 will rise as it pushes ahead on its online stores, which includes a launch in China at year end.

Regional equities had opened lower, in reaction to late selling Wednesday on Wall Street after U.S. President Barack Obama urged European leaders to join the U.S. in a unified response against Russia over its annexation of the Ukrainian breakaway region of Crimea. While much of Europe pared those losses back to a moderate fall, Russia's Micex index fell 1.2% on Thursday.

Stephen Pope, managing partner at Spotlight Ideas, said in emailed comments that he remains positive on the outlook for large-cap European equities. Their ability to generate revenue on a global basis "provides a healthy immunization from any potential European downturn if the tension with Russia were to become more serious.

"The running undercurrent is that the ECB will seek additional ways to boost the economy, and try and finesse a way to bring about a fall in the euro," said Pope.

Traders have spent much of the week discussing the potential for monetary easing to stave off deflation by the European Central Bank at its next meeting, after officials earlier in the week signaled the central bank would consider negative deposit rates and moving toward quantitative easing. The euro (EURUSD) was down about 0.1% against the dollar.

The International Monetary Fund on Thursday said it reached a deal to provide up to $18 billion to Ukraine as part of an economic reform program for the country. Changes required for the aid package may be "painful," Ukraine's central bank chief Stepan Kubiv reportedly said.

In France, a survey showed growth in consumer confidence in March. Insee, the national statistics agency, said the index rose to 88, from 85 in February, returning to a level seen in July 2012. France's CAC 40 narrowed its decline after the data, but was still down 0.3% to 4,372.69. Alstom SA was a big loser after Bloomberg reported that the U.S. Justice Department is building a bribery case against the multinational, citing sources.

The company's lawyer Robert Luskin at Patton Boggs LLP, told Bloomberg the company is cooperating with prosecutors.

Germany's DAX 30 gave up an earlier advance and fell 0.2% to 9,427.69.

The U.K.'s FTSE 100 fell 0.4% to 6,579.34, held back in part by declines among miners and banks. Meanwhile, the U.K. regulator overseeing the electricity and gas markets called for an investigation of providers over concerns about stalled competition. Shares of British Gas owner Centrica PLC reversed course and rose 0.5%, but SSE PLC remained lower, by 2.4%.

Outside of equities, the British pound (GBPUSD) jumped above $1.66 against the U.S. dollar after February retail-sales figures beat analyst expectations.

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