* Drop in volatility index reflects fading systemic fears
* VSTOXX at level last seen in December 2007
* Follows 25 pct jump in E-STOXX 50 over last 6 months
By Blaise Robinson
PARIS, Nov 29 (Reuters) - The Euro STOXX 50 Volatility Index , or VSTOXX, Europe’s widely-used measure of investor risk aversion, hit a five-year low on Thursday in a strong signal of growing appetite for equities.
The VSTOXX, based on put and call options on Euro STOXX 50 stocks, fell as low as 16.88, a level not seen since December 2007, at the beginning of the U.S. subprime crisis which dragged the world into its worst economic crisis since the Great Depression.
“This confirms that the systemic fears stemming from the euro zone sovereign debt crisis are being drained off,” Vincent Cassot, head of equity derivatives strategy at Societe Generale, said.
The VSTOXX, which is used to measure the cost of protecting stock holdings against potential pull-backs as it usually moves in the opposite direction to equities, hit 59.8 in August 2011, when fears of bank failures and a break-up of the euro zone triggered a 30 percent slide in the region’s shares.
Strong measures unveiled over the past year by the European Central Bank to resolve the debt crisis, however, have soothed systemic fears, and the Euro STOXX 50 has jumped about 25 percent in the past six months, strongly outperforming U.S. stocks indexes.