* STOXX 600, euro zone blue chips flat
* Banks rise for fourth day, HSBC hits 4-yr high
* Utilities suffer, leading sectoral losers
* Lafarge falls in weak construction sector
* H&M rises after solid results (Adds details, updates prices)
By Danilo Masoni
MILAN, June 29 (Reuters) - European shares steadied on Thursday as banks extended a winning streak after the U.S. Federal Reserve cleared capital return plans from big banks, off-setting losses among utilities and construction stocks.
Well-received results from fashion retailer H&M and an acquisition from UK packaging firm DS Smith also provided support. Both the pan-European STOXX and euro zone blue chips were flat by 0822 GMT.
Banks rose for a fourth straight session, up 1.4 percent, as news from the Fed added momentum to a rally already fuelled this week by hawkish central bank signals.
Among banks given the Fed green light were also U.S. units of Deutsche Bank, HSCB and Santander , up between 0.6 and 4.7 percent.
"Banking stocks jumped after regulators in the US gave the green light to higher dividends and buybacks, whilst the hint of a shift in tone from central bankers towards tightening is spurring hopes of higher interest rates again," ETX Capital analyst Neil Wilson said in a note.
The Germany heavyweight lender was also supported by news that a U.S. federal judge dismissed a lawsuit accusing it of concealing major deficiencies in its anti-money laundering controls as part of a $10 billion Russian trading scheme.
HSBC, which hit a 4-year high, was also upgraded to Overweight by Morgan Stanley which forecasts the bank to have $45 billion in excess capital by 2019.
"We expect the narrative on HSBC to flip from prior concerns on the dividend to a debate on how to deploy excess capital," Morgan Stanley said.
Meanwhile, money markets priced in a roughly 90 percent chance the European Central Bank will lift interest rates by July 2018, reflecting a rise in investors' rate-hike expectations after comments from the ECB this week were seen opening the door to policy tweaks.
That in turn hurt sectors such as utilities, which suffer as growing expectations of rate hikes make their constant dividend flows less attractive.
Top weights on the sectoral index, down 0.9 percent, were Spain's Iberdrola, Italy's Enel and Germany's RWE with declines of between 0.9 and 1.7 percent.
Tech stocks steadied as a sell-off due to worries over rich valuations petered out but their sectoral index remained on course to end first negative month in eight.
Europe's biggest software maker SAP rose 0.3 percent after solid results at U.S. peer Progress Software.
Among construction stocks, LafargeHolcim fell 1 percent after Deutsche Bank downgraded the cement maker to "hold", while French builders Vinci and Eiffage fell around 2 percent. (Editing by Ed Osmond)