(Updates at 1501 GMT)

By Harry Robertson

LONDON, Aug 22 (Reuters) - Euro zone bond yields were

higher on Thursday after survey data showed the bloc's services

sector fared better than expected in August, although a separate

measure of wage pressures eased.

Germany's 10-year bond yield, the benchmark for

the euro zone, was last up 4 basis points at 2.243%, within its

trading range since recovering from a drop at the start of

August. Yields move inversely to prices.

Purchasing managers' index (PMI) survey data showed euro

zone business activity was surprisingly strong in August, with

services a bright spot.

Germany remained mired in a downturn, however; its PMI

showed business activity contracted in August for a second

consecutive month and by more than expected.

Separate figures showed growth in negotiated wages in the

euro zone slowed sharply to 3.55% year-on-year in the second

quarter, down from a record high of 4.74% in the first quarter.

"The PMI figures are overshadowing these wage numbers," said

Jussi Hiljanen, head of European rates strategy at SEB. "The

service sector is still strong and service sector inflation is

one of the focal points of the ECB (European Central Bank)."

However, Hiljanen said he was surprised by the pick-up in

yields after the PMI data, which was skewed by the Olympics in

France.

Italy's 10-year yield was up 3.5 bps at 3.605%,

and the gap between Italian and German bond yields

stood at 136 bps.

Germany's two-year bond yield, which is more

sensitive to ECB rate expectations, was up 3 bps at 2.402%.

Money market pricing showed traders on Thursday were

expecting 65 bps of further ECB rate cuts this year, little

changed from the day before.

Bond yields tumbled at the start of August after data showed

the U.S. unemployment rate unexpectedly rose in July, raising

concerns about the world's biggest economy.

They have since perked back up as data has suggested the

economy remains solid, although U.S. yields closed lower

overnight after the release of data showing jobs growth in the

country was weaker than previously thought.

The number of Americans filing new applications for

unemployment benefits ticked up in the latest week, but appeared

to be steadying near a level consistent with a gradual cooling

of the labor market, data showed on Thursday.