* Spain's Ibex 35 rises 0.9 pct after strong data * Sustainable recovery to boost Spanish stocks - Deutsche Bank * FTSEurofirst 300 down 0.2 pct as China, U.S. data caps appetite By Francesco Canepa LONDON, Jan 6 (Reuters) - Spanish stocks outpaced a lacklustre broader European market on Monday after strong economic data fuelled expectations of an economic recovery in the country and revived interest in stocks on the euro zone periphery. Spain's IBEX index rose 0.9 percent after data showed the country's service sector grew at its fastest pace in 6-1/2 years. Most other European shares markets dipped. Domestically focused lenders Banco Popular and Banco de Sabadell, which stand to benefit from improving economic conditions in Spain, were among top gainers, surging 7 percent and 4 percent, respectively. Upbeat data has helped the broader MSCI Spain index rise some 30 percent over the past six months, making it the best performer among major European indexes, Datastream data showed. "We think this is really the start of the improvement in data and we see (it) as a sustainable story," said Gareth Evans, a strategist at Deutsche Bank. He expected Spanish and Italian stocks to outperform a 14 percent rise in the broader STOXX Europe 600 index this year. Italy's FTSE MIB rose 0.6 percent on Monday as a poll of the country's services sector activity showed the pace of contraction eased in December. Even after their recent rebound, Spanish and Italian stocks offer more attractive valuations than their peers in the core countries of Germany and France. MSCI's indexes of Spanish and Italian shares respectively trade at a 30 percent and a 50 percent discount to the MSCI Europe based on their price/book value ratios, Datastream data showed, a steeper discount than the indexes' 10-year averages. "I'm overweight on the periphery, as opposed to France and Germany," Clairinvest fund manager Ion-Marc Valahu said. "There's still some value there." The broader FTSEurofirst 300 index of pan-European shares fell 0.2 percent to 1,309.24 points, with the euro zone's Euro STOXX 50 also down 0.2 percent at 3,069.16 points. Trading volume on the FTSEurofirst 300 was 25 percent lower than the index's average for the past three months, with many traders away and some exchanges closed for the Epiphany holiday. The indexes sold off in late trade, with weak Chinese and U.S. data curbing appetite for global equities after a bumper 2013. The FTSEurofirst 300 rose 16 percent in 2013 for its best annual gain since 2009, while the Euro STOXX 50 index rose 18 percent. Darren Courtney-Cook, head of trading at Central Markets Investment Management, said there may be some short-term pull-back on the European stock markets later this month as investors look to cash in gains. He felt the Euro STOXX 50 could fall to 2,950 points over the next two weeks, but that traders should use any such weakness to buy up stocks.