* FTSEurofirst 300 falls 1.2 percent after late selloff
* Insurers hammered after ING says to split up company
* VDAX-NEW volatility index jumps as risk aversion returns
* For up-to-the-minute market news, click on
By Blaise Robinson
PARIS, Oct 26 (Reuters) - European stocks fell for a third
session in a row on Monday as a sharp drop in oil and a rebound
in the dollar sparked a late selloff, with ING sinking 18
percent after it unveiled plans to split up the company.
Insurance shares took a beating after the Dutch bancassurer
said it would transform itself into a smaller European lender
and launch a 7.5 billion euro rights issue.
Allianz dropped 4.4 percent and Aegon fell 6.5 percent.
Banks also ended in the red, with BNP Paribas down 3.7 percent
and Credit Suisse down 2.6 percent.
The FTSEurofirst 300 index of top European shares ended 1.2
percent lower at 996.50 points, its lowest closing level in
nearly two weeks.
"It's a correction that the market has been waiting for over
the past little while," said Jacques Henry, analyst at Louis
Capital Markets in Paris, "although the retreat might not last
because of the strong inflows that are still coming into
equities."
"Investors got the good news they had been hoping for, but
now this has all been digested. Meanwhile, analysts are still
cautious about the earnings recovery and have not really started
to upgrade their forecasts."
Around Europe, UK's FTSE 100 index fell 1 percent while both
Germany's DAX index and France's CAC 40 dropped 1.7 percent.
A sudden flight to quality sent the dollar rallying from
14-month lows versus the euro while risky assets such as
equities and commodities tumbled.
RISK AVERSION RETURNS
U.S. crude oil futures sank more than $2 a barrel, or 2.7
percent, to $78.31, forcing most energy stocks to surrender
early gains, with both Total and Repsol ending down 1.1 percent.
The VDAX-NEW volatility index -- a gauge of investor risk
aversion -- jumped 11 percent to a near three-week high.
The higher the volatility index, which is based on sell and
buy options on Frankfurt's top 30 stocks, the lower investors'
appetite for risky assets.
"We've seen such a tremendous rally in risky assets lately,
but now there are rising doubts over next year's economic growth
as well as over central banks' exit strategies," said Joost van
Leenders, strategist at Fortis Investments.
"Equities might rise a bit further, but overall the
post-recession window for a strong stock market rebound is
closing, and it's closing sooner than people might have
expected."
The FTSEurofirst 300, which is up 20 percent so far this
year, has gained 54 percent since reaching a floor in early
March, helped by improving macroeconomic data and better than
expected earnings.
Among the few stocks gaining ground on Monday, chemical
group Akzo Nobel added 1.4 percent on expectations the group
will post strong results on Tuesday, traders and analysts said.
Electrolux, the world's second-biggest home appliances
maker, surged 6.7 percent after forecast-beating third-quarter
earnings.
(Reporting by Blaise Robinson, editing by Atul Prakash, John
Stonestreet)
