* Manufacturing data weighs on stocks
* News of Ebola case hits travel, leisure stocks; drugmakers rally
* Dollar holds steady after recent run (Adds oil settlement prices)
By Chuck Mikolajczak
NEW YORK, Oct 1 (Reuters) - Stock markets worldwide started the fourth quarter on a weak note on Wednesday, as tepid manufacturing data weighed on European markets and the first confirmed case of Ebola in the United States added to growing volatility in U.S. equities.
Weak economic data, ongoing conflicts in Iraq and Russia, and growing unrest in Hong Kong have contributed to overall expectations that markets will get increasingly rocky in coming months.
"We are going to have some more volatility this fall; that is completely normal," said Jeff Kravetz, regional investment director at U.S. Bank Wealth Management in Phoenix, Arizona.
"A lot of moving pieces in financial markets, so there is going to be some disappointments and also some positive news, so it is going to keep investors on edge."
Bond markets drew safe-haven bidding, with the benchmark U.S. 10-year Treasury's yield falling to 2.405 percent, the lowest in nearly a month. The yield on Germany's 10-year Bund fell as low as 0.897 percent, not far from record lows reached about a month ago.
MSCI's global index of equities was down 1.2 percent after a 3 percent drop in September. The pan-European FTSEurofirst 300 equity index closed down 0.9 percent after final September purchasing managers numbers from France, Germany and the euro zone as a whole highlighted the instability of the European recovery.
U.S. purchasing managers' data was also weaker than expected, though it still showed growth in factory activity.
Wall Street was sharply lower, continuing its recent weakness. Airline and hotel stocks dropped in a knee-jerk reaction to the first confirmed U.S. case of Ebola, which also resulted in sharp rallies in drugmakers with treatments for the disease. An airline index was on track for its worst day since June.
The Dow Jones industrial average was down 248.76 points, or 1.46 percent, at 16,794.14. The Standard & Poor's 500 Index was down 28.61 points, or 1.45 percent, at 1,943.68. The Nasdaq Composite Index was down 80.68 points, or 1.80 percent, at 4,412.71.
The dollar was little changed near a four-year high, helping some commodity prices bounce from a sell-off in the prior session. Spot gold was up 0.5 percent at $1,214.80 an ounce, having earlier fallen to within 10 cents of the previous day's nine-month low at $1,204.40.
The euro zone data, along with a report on slowing euro zone inflation on Tuesday, underscored the contrasting monetary policy outlooks of the U.S. Federal Reserve and the European Central Bank. The ECB meets on Thursday, and its accommodative stance has had investors favoring the dollar over the euro.
The euro, down 0.2 percent at $1.2606, continued to inch lower, but managed to pare declines to climb back above the $1.26 mark, a level it had held for two years until Tuesday.
Oil prices were initially helped by Chinese PMI data before fading late in the session. China's PMI stayed at 51.1, modestly above the 50 level that separates growth from contraction and just above the 51 forecast.
Brent crude oil settled at $94.16, down 0.5 percent on the day. U.S. crude settled at $90.73, also off 0.5 percent. (Editing by Meredith Mazzilli and Dan Grebler)