* London's FTSE outperforms as pound falters on Brexit woes
* European banks lower as bond yields slide
* Swedish banks hit by money laundering scandal
* Sentiment tempered by disappointing U.S. GDP numbers
* U.S.-China trade talks in focus (Updates to closing)
By Susan Mathew
March 28 (Reuters) - European shares pared early gains to finish lower on Thursday as optimism around some progress in U.S.-China trade talks were outweighed by losses in banks amid a gloomy outlook for global economic growth and uncertainties around Brexit.
The pan-region STOXX 600 index slipped 0.1 percent, with Frankfurt's trade-sensitive index DAX giving up most gains to close 0.08 percent lower, while Madrid and Milan slipped more than half a percent each.
The pullback intensified after data showed that economic growth in the United States slowed more than expected in the fourth quarter - the latest addition to a slew of poor economic data from around the globe.
The 0.6 percent rise in London's FTSE 100 was the most among regional indices, spurred by a weaker pound after Wednesday's indicative vote on Brexit ended in a deadlock.
Efforts to persuade lawmakers to back British Prime Minister Theresa May's deal continue with a parliamentary debate scheduled for Friday amid reports that it will not be a so-called 'Meaningful Vote', making the rounds.
"The FTSE is ahead purely because the pound is having a terrible day. But subsequently, the euro's gains against the pound are preventing the DAX and the rest of the euro zone indices from properly joining in with the rally seen in the UK," said Connor Campbell, an analyst at Spreadex.
The factors at play in the market on the day were currency index entanglements, a bit of U.S.-China trade hopes and some bad data from the U.S., Campbell said.
Trade optimism was prompted after Reuters reported that China has made proposals on issues like forced technology transfers as it works to end their trade war as the next round of talks start in Beijing.
Subsequently, White House economic adviser Larry Kudlow said Washington could lift some tariffs.
European banking stocks fell the most on the pan-region index as bond yields continued to decline, keeping alive fears of a slowing global economy. London's Prudential PLC gave up 2.3 percent.
Swedish banks were the worst hit, as fears that a rapidly-growing money laundering scandal centered around Swedbank - the country's biggest lender - would spread to other banks.
Shares of Swedbank slid 7.8 percent, while SEB and Handelsbanken lost more than 6 percent, making the trio among the biggest drags on the STOXX 600.
National Grid fell 3.3 percent after BBC reported that the opposition Labour Party plans to renationalise the utility.
Meanwhile, German mobile operator 1&1 Drillisch's almost 15 percent tumble on fears it could suspend dividends for 5G spectrum auction bid was the biggest on the region's benchmark index.
Auto stocks fell as Fiat Chrysler Automobiles slid 2 percent after Nissan Motor Co's chief executive said he was unaware of discussions about its French partner Renault SA making a bid for the Italian company.
Adding to Fiat Chrysler's woes, Volkswagen said it was not interested in a partnership with the company.
Losses on the STOXX 600 were limited gains in healthcare stocks as international companies, which typically gain from weakness in the pound, such as pharmaceutical giants AstraZeneca and GlaxoSmithKline rose more than 1.5 percent each.
German industrial gases group Linde was among top boosts, up 1.8 percent as UBS raised its price target on the company.
Tech stocks also staged a come back with French It services company Capgemini up 3.8 percent
Reporting by Agamoni Ghosh, Medha Singh and Susan Mathew, editing by Larry King