The Block Inc (ASX: SQ2) share price is surging higher today.
Shares in the global S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) stock – which acquired Afterpay in January 2022 – closed yesterday trading for $81.68. As we head into the lunch hour on Wednesday, shares are swapping hands for $85.14 apiece, up 4.2%.
For some context, the ASX 200 is up 1.6% at this same time.
Here's what's happening.
What's boosting the ASX 200 BNPL stock?
The Block share price is enjoying some upward momentum this week, closing up 0.7% on Monday and 1.9% yesterday.
Today's tailwinds look to be blowing out of the United States.
Block shares are dual-listed. And the stock closed up 5.9% on the New York Stock Exchange overnight.
That big lift came after the latest US inflation data surprised, slightly, to the downside.
Annual headline inflation in the world's biggest economy slowed to 3.2% for the 12 months through October. That was down from an annual inflation reading of 3.7% over the prior two months.
And the closely watched core inflation, which excludes volatile items like energy and food, came in at 4%, the slowest pace in two years.
That's giving a supersized boost to the Block share price, as many economists are now forecasting that the Federal Reserve is finished with its interest rate hikes in the current cycle.
While higher interest rates tend to drag on many stocks, BNPL companies like Block are more sensitive to rate hikes than most.
That's partly because Block is a growth stock, priced with future earnings in mind. And when interest rates rise, so too does the present cost of investing in those future earnings.
Stubbornly high inflation and the resulting higher interest rates also eat away at consumer spending, crimping Block's medium-term revenue outlook. Lower inflation then, as you'd expect, offers a boost for that outlook.
Block share price snapshot
Today's big boost sees the Block share price up 24% over the past month.
Despite that charge higher, shares in the ASX 200 BNPL stock remain down 20% over 12 months.
