* Euro zone data generally upbeat
* Bunds fall after Draghi disappoints some in the market
* If U.S. government shutdown continues, Bunds may benefit
By Emelia Sithole-Matarise and Ana Nicolaci da Costa
LONDON, Oct 3 High-rated euro zone bond prices fell on Thursday as generally upbeat European economic data prompted investors to sell and as a batch of bond sales weighed on the market.
Growth in services companies, comprising the vast bulk of the euro zone's private sector, increased in September at the fastest pace since June 2011 while retail sales rose much more than expected in August.
Bond sales by Spain, France and Britain also weighed on the market in trading thinned by a public holiday in Germany, though some of the losses were recouped later in the day after data showed growth in the U.S. services sector cooled in September.
"The data in euro zone was positive, the retail sales data in particular surprised a bit to the upside and that weighed on the market," said Gianluca Ziglio, head of fixed income research and Sunrise Brokers.
German 10-year yields rose 1.1 basis points to 1.81 percent while Bund futures shed 9 ticks to settle at 140.23.
French 10-year yields edged 2 bps higher to 2.36 percent as the market absorbed France's sale of 7.46 billion euros of long-dated bonds. The debt sale met firm demand . Yields on other higher-rated debt, including from Belgium, the Netherlands and Austria, also rose.
Among lower-rated bonds, Irish yields were 2 bps lower at 3.78 after data showed services growth cooled in September. But Spanish yields, which hit their lowest in almost five months on Wednesday, were steady at 4.26 percent after a debt sale and a contraction in the country's services sector.
Italian 10-year yields were also unchanged on the day at 4.38 percent. Even though Italian Prime Minister Enrico Letta won a confidence vote on Wednesday, analysts say political risk could continue to weigh on Italy relative to its peers.
The market was also digesting comments from European Central Bank President Mario Draghi on Wednesday when he sounded slightly less dovish than some in the market had expected.
Draghi told a news conference the central bank was watching moves in market interest rates closely and was ready to use any policy option to temper them if needed. But he made a distinction between excess liquidity in the financial system and short-term money market rates, saying there was "no stable relation" between the two.
The excess liquidity held by euro zone banks last stood at 220 billion euros. At 200 billion, market rates have historically started to rise.
"Draghi kept a rather dovish tone but we have a feeling that the ECB is not as ready as it is telling us to launch the LTRO (long-term refinancing operation) or even to cut rates," Cyril Regnat, fixed income strategist at Natixis, said.
Markets were also keeping a wary eye on the partial U.S. government shutdown which analysts said, if it continues, should benefit safe-haven debt.
"If they don't progress towards a solution to resolve this before they hit the debt ceiling the market may become more nervous on this. The potential impact on the economy would support long-dated yields on the assumption that (Federal Reserve) tapering is going to be delayed," Ziglio said.