European stocks slumped and the euro hit lows versus the dollar not seen since January as investors witnessed euro-era high yields at Italy's latest bond auction, exacerbating concerns that the euro-zone's sovereign-debt crisis is far from over.

There was further pressure on markets as the German chancellor continued to resist increasing the size of Europe's permanent bailout fund, the European Stability Mechanism, and after an International Monetary Fund official warned that reforms in Greece are falling short of expectations.

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