Spanish stock market outperforms weak European bourses

* Madrid stock market rises after rebound in Spain economy

* Madrid outperforms dip in FTSEurofirst 300 index

* FTSEurofirst 300 down 0.2 pct, ESTOXX 50 up 0.2 pct

* Buy into any dip - Central Markets trader

By Sudip Kar-Gupta

LONDON, Jan 6 (Reuters) - Spanish stocks rose to outperform weaker European equity indexes on Monday, as signs of a rebound in the Spanish economy lifted the Madrid market.

Spain's IBEX benchmark equity index rose by 0.7 percent in mid-session trading, making it the best-performing regional European market.

The IBEX outperformed a 0.2 percent dip in the pan-European FTSEurofirst 300 index as weak Chinese data weighed on world stock markets.

France's CAC stock market underperformed by trading flat, after a survey from data compiler Markit showed that a contraction in the French services sector had accelerated in December.

By contrast, Spain's service sector registered its fastest pace of growth in six-and-a-half years in December, fuelling optimism the economy could expand more than expected in 2014.

Spain and Italy - another economy dubbed as a "peripheral" European market compared to the "core" of Germany and France - are slowly recovering from the euro zone's sovereign debt crisis, and the rise in the IBEX also lifted Milan's FTSE MIB stock market by 0.6 percent.

Some traders and investors feel there is more value in those "peripheral" markets than the likes of France or Germany, with the German DAX equity index having already hit record highs.

"There's a real swing in momentum towards economies such as Spain," said Scott Meech, co-head of European equities at Union Bancaire Privee (UBP).

Meech's favoured Spanish stocks include Spanish bank Bankinter (Frankfurt: A0MW33 - news) , insurer Mapfre (Xetra: CMAB.DE - news) and media company Mediaset (Other OTC: MDIUY - news) .

Meech added that a decline in Spanish government bond yields, which fell to their lowest level since September 2010 last week, also indicated growing investors' confidence towards the country.

"The Spanish bond yields are just shy of 4 percent, which is only 80 basis points more than U.S. Treasuries," he said.

Clairinvest fund manager Ion-Marc Valahu also said he was "overweight" on the peripheral European markets.

"I'm overweight on the periphery, as opposed to France and Germany. There's still some value there," said Valahu.

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 after the region's strong finish to 2013.

The FTSEurofirst 300 rose 16 percent in 2013 to mark its best annual gain since 2009, while the Euro STOXX 50 index rose 18 percent.

Courtney-Cook felt the Euro STOXX 50, which was up by 0.2 percent at 3,079.22 points, could fall down to the 2,950 point level over the next 2 weeks, but added that traders should use any such weakness to buy up stocks.

"There could be a pull-back, but you should buy into that pull-back," he said.