Traders work on the floor of the New York Stock Exchange September 22, 2014. REUTERS/Brendan McDermid

By Herbert Lash

NEW YORK (Reuters) - More downbeat data from Europe pushed global equity markets to a third day of losses on Tuesday, while U.S. air strikes in Syria set a cautionary tone and lifted prices of safe-haven bonds.

President Barack Obama vowed to continue the fight against Islamic State fighters following the first U.S.-led air strikes targeting the militant group in Syria. The strikes drove safe-haven bids on concerns that the conflict could intensify.

The European data "is a little concerning," said David Lebovitz, global market strategist for J.P. Morgan Funds in New York. "We didn't expect things to improve there forever and always, but we are seeing a bit of a slowdown, which is weighing a bit."

The benchmark 10-year U.S. Treasury bond rose 10/32 in price to yield 2.5311 percent. Data showing euro zone business activity in September expanded at a slightly weaker pace than expected also lifted prices.

Stocks on Wall Street dropped, following downward pressure in Europe after data based on surveys of thousands of companies across the region indicated slower growth. Firms cut prices for a 30th consecutive month to boost sales.

Shares of a dozen companies on both sides of the Atlantic fell, wiping out a total of $13 billion of stock market value, after the U.S. Treasury took steps to curb "inversion" deals aimed at escaping high U.S. taxes by reincorporating abroad.

The manufacturing PMI for Germany slumped to its lowest since June 2013, below forecasts in a Reuters poll. A services industry PMI for the bloc's No. 2 economy, France, faltered after just two months in growth territory.

Markets shrugged off data showing U.S. manufacturing activity held near a 4-1/2 year high this month.

MSCI's all-country world index <.MIWD00000PUS> fell 0.62 percent to 421.92, while the FTSEurofirst 300 index (.FTEU3) of top European shares closed down 1.34 percent at 1,374.85.

The Dow Jones industrial average (.DJI) closed down 116.81 points, or 0.68 percent, at 17,055.87. The S&P 500 (.SPX) fell 11.52 points, or 0.58 percent, to 1,982.77 and the Nasdaq Composite (.IXIC) lost 19.00 points, or 0.42 percent, to 4,508.69.

Despite the downbeat tone in markets, the prospect that stocks continue to rally appears likely, said Andrew Wilkinson, chief market analyst at Interactive Brokers Group in Greenwich, Connecticut.

"The underpinnings of the global stock market rally remain intact, so there's not a lot of catalyst for change," Wilkinson said. He cited the Federal Reserve's low interest rate pledge last week, rising albeit tepid global growth and earnings that justify current market valuations.

The dollar rebounded against both the euro and Japanese yen, trading near break-even. The euro rose 0.04 percent to $1.2854, while the yen slipped 0.01 percent to 108.85.

The dollar index (.DXY) fell 0.09 percent at 84.676.

Brent crude oil inched lower as ample global supplies outweighed tensions in the Middle East, while U.S. oil bounced higher after four sessions of losses.

Brent for November delivery (LCOc1) settled down 12 cents at $96.85 a barrel. U.S. crude (CLc1) rose 69 cents to settle at $91.56 a barrel.





(Reporting by Herbert Lash; Additional reporting by Marc Jones in London; Editing by Dan Grebler and Chizu Nomiyama)