Asian stock markets bounced back from the brutal sell-off of the last two trading days as plunging bond yields ramp up pressure for interest rate cuts.

Tokyo’s benchmark Nikkei 225 index led gains as it jumped 10.2pc, or 3,217.04 points, to end at 34,675.46, a day after plunging 12.4pc in its worst rout since Black Monday in 1987.

Japan’s broader Topix index added 9.3pc, or 207.06 points, to 2,434.21, with nearly all Asian markets higher and the FTSE 100 on track to jump when trading begins.

However, many European markets - including Paris and Milan - are still on track to fall at the open.

Matt Simpson, senior market analyst at City Index, said: “We’re not yet sure if this is just a breather between water-boardings or there is more pain to follow.” 

It comes after a rally in the $27 trillion US Treasury bond market on Monday raised pressure on the US Federal Reserve to begin cutting interest rates.

Yields on 10-year Treasury notes were back at 3.84pc, having been as low as 3.67pc at one stage.

Traders are betting there is an 83pc chance that the Federal Reserve will cut interest rates by half a percentage point at its next meeting in September, with a whole percentage point of cuts priced in by the end of the year.

Economist Campbell Harvey told Bloomberg that “the Fed likely realises now that they made a mistake last week” by leaving interest rates unchanged at their 23-year highs.

He added: “The Fed has waited too long to take action.” 

Read the latest updates below.