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STOCKS NEWS EUROPE-Volatility index falls despite stock losses

The Euro STOXX 50 volatility index , Europe's widely-used measure of investor risk aversion, falls 2.5 percent to a one-week low of 21.06 in early trade, sending a contrarian signal while the underlying Euro STOXX 50

index slips 0.2 percent.

The VSTOXX, which measures the cost to protect stock holdings against potential pull-backs as it usually moves in an opposite direction to equities, has lost nearly 10 percent in three sessions, signalling a sharp drop in investor risk aversion and pointing towards a rally in equities in the coming days.

Reuters Messaging: blaise.robinson.thomsonreuters.com@reuters.net

Keywords: MARKETS EUROPE STOCKSNEWS