* FTSEurofirst 300 down 0.1 percent
* Euro STOXX 50 falls for 12th straight session
* Volatility indices surge to more than 2-1/2 year highs
By Harro ten Wolde and Blaise Robinson
FRANKFURT/PARIS, Aug 9 (Reuters) - European stocks were flat on Tuesday afternoon in volatile trading that saw big losses earlier, with miners leading the way back following stronger base materials and as U.S. futures turned positive.
Shares had fallen sharply during the morning on fears about another recession in the United States and Europe.
The FTSEurofirst 300 index of top European shares was down 0.1 percent at 934.94 at 1220 GMT, after an 888.11 low.
"At these levels we should expect the bull to return to the market," a German trader said. "We are looking at stock valuations below or close to book values."
The euro zone's blue-chip Euro STOXX 50 index was down 0.9 percent at 2,265.47, losing ground for the 12th session, its longest losing streak since its creation in the late 1980s.
The broader STOXX 600 index trades at 10.2 times 12-month forward earnings, below a 10-year average of 13.3, according to DataStream.
Dominic Rossi, chief investment officer at Fidelity International's equity unit, which has 215 billion euros ($303 billion) in assets, said technicals were pointing to "very oversold conditions" and equities were cheap.
"We are going to be in an era where stocks are going to be cheap. Equities are seen as a risky asset class these days ... and as result investors are going demand very high equity risk premiums. They look cheap, but there is a reason why they look cheap because people see them as very risky," he said, adding he expected this to last 2-3 years.
Data from 2iQ Research showed European corporate insiders have been scooping up shares in their companies in large volumes this month even as the market plummets to two-year lows.
According to the Frankfurt-based research firm which monitors directors' dealings in Europe, corporate insiders have bought around many times times shares more than they have sold in August -- the buy/sell ratio is 6.59 this month, the highest since 2003, and way above the median ratio of 0.81 over the past eight years.
FED TO THE RESCUE?
Europe's two volatility indices, The Euro STOXX 50 volatility index and the VDAX-NEW volatility index , hit their highest levels since late 2008, signalling a sharp rise in investor risk aversion and a run to safe-haven assets. "Only in the days after the collapse of Lehmann in 2008, we have seen higher levels," a trader said.
Across Europe, Britain's FTSE 100 was flat, while France's CAC40 was up 0.4 percent.
The German DAX remained underperformed with a 1.6
percent loss, as utility heavy-weights E.ON
RWE said first-half profit was hit by a government decision to phase out nuclear power. The STOXX Europe 600 Utilities , down 2 percent was the biggest sector decliner.
Investors were looking to a U.S. Federal Reserve policy meeting later for action that could brake the slide hoping for fresh moves after just completing a $600 billion bond programme known as QE2 in June.
"With global equity markets in a slide the chances have risen that the Fed joins in tonight to the global crisis response. At this point the Fed might still explore other options before venturing into fully fledged QE3, said Commerzbank analyst Benjamin Schroeder.
Fidelity's Rossi said he had reservations. "I am not confident that quantitive easing is leading to improvement in economic growth. Apart from providing a boost to equity markets in short run, I am not sure if it is going to lead to a sustainable path," he said. (Editing by Dan Lalor) ($1= 0.7099 euro)