Diageo: Share price rises as investors breathe a sign of relief
Diageo’s share price rose more than two per cent as investors digested US President Donald Trump’s announcement on tariffs.
Trump imposed a sweeping 20 per cent tariff on all EU goods going into the US on 3 April, but only a 10 per cent tariff on UK goods.
“The UK is a relative winner from Liberation Day given its 10 per cent tariff rate is the lowest of the pack. Relative to the EU’s 20 per cent tariff, the UK is looking much stronger,” Dan Coatsworth, investment analyst at AJ Bell, said.
The unequal tariffs are “shifting the dynamics between UK and European stocks,” Kathleen Brooks, research director at XTB, said.
Investors “might be favouring UK apparel makers in favour of European brands”, Brooks added, regardless of global supply chains.
As the market opened, Diageo’s stock price rose by more than double – three per cent versus 1.4 per cent – of fellow drinks maker Pernod Ricard in France.
“This suggests two things. One, that the market thinks booze sales could be relatively unscathed by Trump’s tariffs, and two, that UK drinks companies could be better positioned than their European counterparts,” Brooks said.
Coatsworth said that the tariff difference made Diageo one of the “stocks in demand”.
“[Diageo] investors were relieved that tariffs on goods from the UK weren’t as punishing as previously feared,” he said.
The guinness-maker had said that tariffs could offset its budding recovery.
Concerns over tariffs helped to fuel a sell-off in Diageo stock at the start of February.
In the week after Diageo announced its concerns, its stock price fell eight per cent.
At the time, commentator Charlie Huggins said that Trump’s tariffs “cloud[ed] the outlook and are a major kick in the teeth for shareholders.”
It seems Diageo has benefited from both certainty and by not being kicked quite as hard as its European competitors.