Spanish shares outpace flat European bourses on growth bets

* Spanish shares rise after strong services PMI

* FTSEurofirst 300 dips 0.1 pct, Euro STOXX 50 up 0.1 pct

* Eyes on ECB decision at 1145 GMT, conference at 1230 GMT

By Francesco Canepa

LONDON, April 3 (Reuters) - Spanish shares outperformed flat European markets on Thursday as strong services sector data strengthened investor optimism about an economic recovery in the struggling Mediterranean country.

Investors refrained from making large bets on pan-European indexes as they waited to see whether the European Central Bank, at a policy meeting, would offer more signs it is ready to take steps to stop disinflation becoming deflation.

Spain's Ibex index, however, rose 0.7 percent, taking its rise since its March low to around 8 percent, as data showed the country's service sector expanded more than expected last month, fuelling hopes of overall economic growth in the first quarter.

Shares exposed to Spain's own economy, such as domestic lender Bankia (Madrid: BKIA.MC - news) and broadcaster Mediaset Espana (Munich: RWW.MU - news) led risers on the Ibex, both adding around 2 percent.

The Ibex as a whole has risen nearly 40 percent since late June 2013 as the country began to emerge from a deep recession. The index has outperformed its peers in core European countries, such as Germany's Dax.

"Spain is clearly doing its part," Mike Reuter, global equity broker at Tradition. "Bar anything extraordinary happening, the Ibex is going to have a strong year again compared to the Dax."

The German index was down 0.1 percent at 1030 GMT. The pan-European FTSEurofirst 300 was also down 0.1 percent, at 1,342.15 points, while the euro zone Euro STOXX 50 was up 0.1 percent at 3,191.64 points, having set a fresh 5-1/2 year high at 3,197.05 points earlier in the day.

The FTSEurofirst 300 has risen for the past seven sessions, partly due to speculation that the ECB may signal it is prepared to cut deposit rates below zero - effectively charging banks to hold cash with the bank - or embarking on bond purchases as the United States, Japan and Britain have.

Market calls for ECB action mounted on Thursday as surveys showed that while euro zone businesses logged their busiest quarter in three years at the start of 2014, they did so by slashing prices, underscoring fears that deflation may soon afflict the region.

However, there has been little sense that a majority of ECB officials favours imminent use of any of those tools and most may prefer to keep such policies on standby in case of an external economic shock. The bank is due to

The bank was due to announce its rate decision at 1145 GMT and hold a press conference at 1230 GMT.

"I think the market has got ahead of itself, ahead of the ECB," said Darren Courtney-Cook, head of trading at Central Markets Investment Management.

"I don't think we'll do too much ahead of the ECB. My own view is that if they cut, we may rally for a bit and then sell off, and if they don't cut, markets will sell off."

British-listed oil services firm Tullow Oil (LSE: TLW.L - news) topped the FTSEurofirst, rising by 4.9 percent, as UBS (Xetra: UB0BL6 - news) upgraded the stock to "buy" from "neutral", citing significant upside potential for the group's onshore business.

Tullow suffered a string of disappointing drilling results and lost a quarter of its value in 2013, when it was the worst-performing stock on Britain's FTSE 100 outside of the mining sector.

Europe bourses in 2014: http://link.reuters.com/pap87v

Asset performance in 2014: http://link.reuters.com/gap87v

Today's European research round-up (Additional reporting by Sudip Kar-Gupta; Editing by Susan Fenton)