* Euro zone services PMI highest since Nov 2007
* Business expectations highest since Jan 2006
* Composite PMI highest since Aug 2007
By Jonathan Cable
LONDON, April 7 (Reuters) - The euro zone's dominant service sector expanded at its fastest pace in over two years in March with all four big economies expanding as firms grew more optimistic about the year ahead, a survey showed on Wednesday.
Markit said its final Eurozone Services Purchasing Managers' Index of around 2,000 companies, ranging from banks to hotels, jumped to 54.1 in March from 51.8 in February, revised up from a flash estimate released two weeks ago of 53.7.
That is its highest reading since November 2007 and marks the seventh month the index has been above the 50.0 mark that divides growth from contraction.
Earlier data showed Spain's service sector grew for the first time in over two years while in Germany, the 16-nation bloc's biggest economy, the sector expanded at its fastest pace in nearly two years. Italy also witnessed accelerating growth.
France's service sector expanded, albeit at a slower pace than in February.
"The service sector has lagged behind manufacturing in the recovery, but is finally showing encouraging signs of life ... with a return to growth in Spain meaning all four largest member states are now expanding," said Chris Williamson at Markit.
The buoyant picture for the euro zone services sector followed upbeat data on Monday from the United States whose services index grew in March at its fastest pace in nearly four years. The Institute for Supply Management index came in at 55.4, exceeding expectations for 54.0.
Euro zone data released last week showed its manufacturing sector grew faster than previously thought last month, with the PMI revised up to a 40-month high of 56.6.
The combined rises took the Composite PMI to 55.9, revised up from the flash 55.5 and well above February's 53.7, its highest reading since August 2007.
"The final composite euro zone PMI for March suggests that, despite setbacks due to adverse weather in some parts of the region, GDP looks likely to have risen by 0.4-0.5 percent during the first quarter," Williamson said.
Revised data due later on Wednesday is expected to show the 16-nation bloc's economy grew a lacklustre 0.1 percent in the final quarter of 2009, but economists expect growth of 0.2 percent in the first three months of this year.
EXPECTATIONS UP
The service sector business expectations index rose to 68.7 in March from 66.4 in February, revised up from a flash reading of 67.3, and its highest level since January 2006. Markit said confidence increased in France, Germany, Spain and Ireland.
But while firms grew more optimistic they continued to cut jobs to reduce costs.
The composite employment index rose to 48.8 in March, revised up from a flash reading of 48.6 and above February's 47.9. March was the 21st month for a below 50.0 reading.
Official data late last month showed unemployment hit 10 percent in February, its highest since August 1998.
French technology group Technicolor said last week it plans to cut 625 jobs worldwide while German printing press maker Heidelberger Druckmaschinen plans to cut another 850 jobs. (Editing by Stephen Nisbet)