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    Home » Here’s a surprising winner after the UK stock market reacts to the latest US tariffs — Diageo
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    Here’s a surprising winner after the UK stock market reacts to the latest US tariffs — Diageo

    userBy userJuly 9, 2025No Comments3 Mins Read
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    Image source: Getty Images

    The stock market had plenty to digest this week after the latest news about US trade tariffs. On Tuesday (8 July), the Trump administration once again postponed trade tariffs until 1 August, leading to a mixed reaction from market participants.

    The pound slipped amid a broader global bond sell-off, and the UK market saw distinct sector shifts. FTSE 100 miners and oil giants proved standout beneficiaries. Shares in Glencore, Shell and BP all jumped between 2% and 3%, largely thanks to hopes that commodity pricing power will improve if global supply chains are disrupted.

    Airlines IAG and EasyJet also managed modest gains of around 1.5%. Meanwhile, insurers and housebuilders struggled under renewed growth concerns. Phoenix Group and Admiral each lost roughly 1.5%, while major property trusts such as LondonMetric Property and Land Securities Group suffered similar declines.

    Prudential was a slight outlier, ticking higher, but the broad underperformance in financials was clear.

    A surprise winner

    One name that stood out for me was drinks giant Diageo (LSE: DGE). The Guinness and Johnnie Walker owner rose 2% on the day, continuing a rebound that’s now seen it climb 5.3% in the past week.

    This comes as something of a surprise given the stock’s rather depressing year. It’s still down around 23% in 2025, battered by slowing consumer demand and cost inflation. Yet there are signs this could be the start of a broader recovery.

    Back in late May, it announced fresh cost-cutting initiatives designed to offset roughly $150m in potential tariff-related hits. The market appears to be warming to this plan. In its latest interim report, revenue came in slightly ahead of forecasts, beating them by 1.43%. However, earnings still missed estimates by 7.9%, despite a small rise to £1.5bn.

    Dividends despite the risks

    My biggest concern is Diageo’s debt, which steadily increased following the pandemic as high inflation forced tighter budgets. It’s still struggling to bring its debt-to-equity ration down to 1 or less. That remains a notable risk, particularly in a higher interest rate environment.

    Despite some improvement, discretionary consumer spending remains under pressure, which could impact sales of top-shelf brands if economic growth stalls again.

    Yet for all these risks, I see reasons for optimism. Diageo is one of the world’s most recognisable drinks companies, with powerful brands that have pricing power and global reach. It’s rare to find such a high-quality business trading at a discount of more than 20% year to date.

    Plus the dividend yield still stands at 4.2%, comfortably covered by both cash flow and earnings. That suggests the board remains committed to rewarding shareholders even during this challenging stretch.

    My verdict

    For my part, I think Diageo is beginning to look even more like a compelling opportunity at this valuation. It still has work to do to get its balance sheet in shape and earnings back on track but I think its chances are good — if management can deliver on cost savings and continue leveraging its strong brand portfolio.

    Overall, it think it’s still an attractive UK share that’s worth considering in the current market shake-up. As always, I’d see it best held as part of a well-diversified portfolio – ideally alongside more defensive and growth-oriented picks.



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