Oil is ending the day flat, another sign that investors are more relaxed about Middle East events.

This leaves Brent crude unchanged at $87.10 per barrel.

Sir Dave Ramsden concluded his speech in Washington (online here) by saying he would take a “watchful and responsive” approach to setting interest rates:

He says:

The MPC will have to consider collectively the degree of restrictiveness of policy at each upcoming meeting to ensure inflation returns sustainably to the 2% target. I will continue to take a watchful and responsive approach to my policy decisions as I have tried to do throughout this period of unprecedented structural shocks.

Watchful, in terms of assessing the evidence as it accumulates and responsive in terms of the stance of monetary policy warranted by the evidence.

Some Bank critics have said it is being too slow to respond to the economic slowdown by leaving interest rates on hold since last summer, having been too slow to raise them as inflation began to rise in 2021.

In his speech, Sir Dave Ramsden shows how recent falls in headline inflation have dampened inflation expectations.

That leads to a drop in pay growth, which leads to a slowdown in services inflation (as firms have smaller wage increases to pass on), he explains.

Professor Costas Milas of the University of Liverpool is concerned by the rather relaxed response of financial markets to the Iran-Israel conflict.

He tells us:

It looks like financial markets are buying into the argument that either Iran or Israel can ...“put into a computer program” their military operations and that these operations will run “smoothly”.

Both Iran and Israel are playing with fire.

Past experience, as I note in a recent LSE Business blog, shows that oil prices and inflation do increase in response to rising geopolitical risk and, at the same time, UK growth will take a “hit”. I am rather sceptical that “this time is different”.

A senior lawyer for the Post Office fought a high court case brought by post office operators “tooth and claw” because the state-owned body knew criminal appeals would follow if it lost the lawsuit, a public inquiry heard today.

Rodric Williams, a senior lawyer with the Post Office, was giving evidence for the second day to a public inquiry which is looking into how hundreds of post office operators were pursued and prosecuted for more than a decade over alleged financial shortfalls in their branch accounts, which it has since emerged were caused by bugs in the Post Office’s Horizon IT system.

Williams who is the head of legal (dispute resolution and brand) at the Post Office was asked about the aggressive litigation strategy which Post Office took in fighting a high court lawsuit brought by post office operators including Alan Bates, whose fight for justice was dramatised by ITV earlier this year. The high court case paved the way for the convicted victims to be exonerated.

Edward Henry KC, a barrister acting for post office victims, put to Williams that Post Office had fought the high court lawsuit “tooth and claw” because they knew if they lost the case “ a cascade of criminal appeals would follow.”

Williams replied:

“I don’t recall turning my mind to that at the time.”

Henry also accused Williams of being in possession of all the information that was eventually deployed to overturn the conviction of post office operator Seema Misra, one of the best known victims of the scandal.

In 2010 Misra was sentenced to 15 months in prison for theft and locked up on her son’s 10th birthday while eight weeks pregnant. She was placed on suicide watch after collapsing in court. Her conviction was amongst those overturned by the court of appeal in 2021.

The inquiry heard that Williams knew by 2013 and certainly by 2016 that expert evidence used in her trial was flawed and her criminal conviction was unsafe.

Henry said:

“Mrs Misra’s conviction was eventually quashed in April 2021, ten and half years after she’d been wrongly convicted. You personally were aware of information sufficient to quash her conviction by July 2013 weren’t you?”

Williams replied:

“I had information - whether it was sufficient to quash.. That I do not know.”

The inquiry continues.

The US stock markeet hs opened flattish, as anxiety over the Middle East eases.

The S&P 500 share index has dipped just 2 points, or 0.05%, to 5,008, while the Dow Jones industrial average has gained 0.2%.

The tech-focused Nasdaq has lost 0.3%, as shares in streaming service Netflix slide 7% after it issued a mixed trading outlook last night.

Interesting developments in the UK supermarket scene today.

Bloomberg are reporting that US private equity firm TDR Capital is closing in on a deal to buy billionaire Zuber Issa’s 22.5% stake in Asda.

The deal, if completed, would increase TDR’s stake in Asda and tighten its grip on the indebted supermarket chain.

Bloomberg reports:

The agreement for Issa’s 22.5% stake would give TDR majority control and could be announced in coming weeks, the people said, asking not to be named with negotiations in flux. They declined to specify the terms being discussed.

TDR’s holding in Asda would rise to about two-thirds, while the transaction would further the dismantling of the relationship between brothers Zuber and Mohsin Issa.

Zuber Issa, his brother Mohsin, and TDR bough a majority stake in Asda in 2021. The Blackburn-based Issa brothers had previously become billionaires by building up a petrol station empire.

It emerged in February that Zuber was looking to sell his stake, after the breakdown of Mohsin’s marriage was said to have “sent shockwaves” through the family.

Rising real wages could help the UK retail sector recover in 2024, argues Barbara Teixeira Araujo, an economist at Moody’s Analytics.

Following this morning’s weaker-than-expected retail sales report, Teixeira Araujo says:

“While U.K. retail sales were flat in March, it is not all doom and gloom. Sales rose in the first quarter at the strongest pace since the post-pandemic rebound in mid-2021, and will contribute around 0.1 percentage points to first-quarter GDP growth.

Our view is that the retail sector bottomed out in the second half of 2023, and we expect rising real wages to support sales in the high street this year. April’s cut to National Insurance contributions, combined with the increases in the state pension, welfare benefits and with the rise in the National Living Wage will further support take-home pay, making 2024 the year when retailer’s fortunes will likely turn.”

Global stock markets are inching higher after hitting a two-month low earlier today.

The MSCI All Country index dropped to its lowest since February as reports of an attack on Iran came in, but has since recovered a little as Tehran played down the incident.

Amazon could be forced to recognise a trade union for the first time in the UK after members of the GMB at the internet retailer’s Coventry warehouse were granted permission to hold a legally binding ballot.

The Central Arbitration Committee (CAC), the independent statutory body that adjudicates on collective bargaining rights, has ruled that a vote should be held at the site to test support for union recognition.

A win would give the GMB the right to discuss terms and conditions such as pay, hours and holidays with Amazon.

Elsewhere in the City, the battle to own packaging firm DS Smith seems to have wrapped up.

British paper and packaging group Mondi has announced it has decided it will not make an offer to buy rival DS Smith.

Mondi folded after DS Smith agreed to be taken over by International Paper of the US in a £5.8bn all-share deal, earlier this week.

Back in March, Mondi had pounced on DS Smith and agreed an all-share deal worth £5.14bn; that agreement, though, has been gatecrashed by International Paper.

Mondi says today:

Following a period of due diligence, and after carefully considering the value the combination with DS Smith would deliver to Mondi’s shareholders, the Mondi Board has decided that the transaction would not be in the best interests of its shareholders. Accordingly, Mondi does not intend to make an offer for DS Smith.

Shares in DS Smith have tumbled by 10%, as traders abandon hopes of a bidding war. Mondi’s shares have jumped 9%.

After approaching a record high early ths morning, gold has now slipped back as Tehran plays down today’s attack.

Bullion is just 0.1% higher at $2,381 per ounce, having traded as high at $2,417/ounce at one stage.

In the building sector, construction group Geoffrey Osborne is calling in the administrators.

A notice announcing the company’s intention to appoint adminstrators was filed with the High Court shortly before 4pm yesterday, Construction News reports.

This follows “an extensive effort” to secure new investment, Geoffrey Osborne explains, following difficult years in which the construction sector was hit by the pandemic, rising costs, and the surge in mortgage rates.

The company says:

Osborne has faced significant headwinds common to the entire construction [industry] over the past two years, fuelled by high inflation, the lingering impacts of Covid-19 and Brexit, and a slowdown in public sector procurement.

Despite these challenges, Osborne has maintained strong relationships with suppliers, contractors and staff, while delivering for customers.

UK mortgage rates have crept a little higher, after we learned on Wednesday that inflation fell by less than expected last month.

The financial markets are now pricing in slightly less than two interest rate cuts this year, meaning investors aren’t fully convinced that the Bank of England will have cut Bank rate to 4.75% by December from 5.25% today.

Data firm Moneyfacts reports that average mortgages rates are a little higher this morning:

• The average 2-year fixed residential mortgage rate today is 5.83%. This is up from an average rate of 5.81% on the previous working day.

• The average 5-year fixed residential mortgage rate today is 5.40%. This is up from an average rate of 5.39% on the previous working day.

Britain’s FTSE 100 index is also being pushed lower by retail stocks.

JD Sports (-2.3%) and Marks & Spencer (-2.1%) are in the top Footsie fallers, amid disappointment that sales volumes were lower than expected in March.

UK retailers’ failure to grow sales volumes last month (see earlier post) shows price rises are deterring consumption, says Paul Donovan, chief economist at UBS Global Wealth Management:

UK March retail sales were weaker than consensus expectations. Consumers still seem intent on punishing attempts at profit-led inflation— price increases are deterring consumption.

UK retail sales data does not directly capture the pivot to spending on having fun as services are not included, but stronger clothing sales hint at this trend.

Although European stock markets certainly aren’t in a full-blooded plunge, yet anyway, the main indices are all in the red – following losses across Asia overnight (see 7.21am).

The European Stoxx 600 is at a one-month low, as investors fret about events in the Middle East.

Here’s the situation in early trading:

• FTSE 100: -36 points or -0.46% at 7842 points

• Germany’s DAX: -152 points or -0.9% at 17,681 points

• France’s CAC: -45 points or -0.6% at 7,976 points

• Italy’s FTSE MIB: -345 points or -1% at 33,533 points

• Wall Street is heading for losses when it opens in four hours, too, with the S&P 500 down 0.5% in pre-market trading.

Richard Hunter, head of markets at interactive investor, says:

“Asian markets bore the brunt of the breaking news of a retaliatory attack on Iran by Israel, also sending Dow futures sharply lower and resulting in further spikes in gold and oil prices.

US markets will not have the opportunity to react directly to the developments until later, but the escalation will put pressure on the main indices, which were already lining up for a weekly drop. The Dow Jones managed a wafer-thin gain on Thursday, whereas the Nasdaq and S&P500 continued on a downward trend which is eroding the heady gains made over recent months.

In the year to date, the Dow has now added just 0.2%, the Nasdaq 3.9% and the S&P500 5% as interest rate concerns continue to weigh on investor sentiment.

Gas prices have jumped this morning, with the UK month-ahead contract up 1.9% to 82.7p per therm.

Automotive fuel sales volumes rose to their highest level since May 2022 in March, today’s retail sales report shows.

Retailers told the ONS this rise was linked to increased footfall on their forecourts.

March’s retail sales stagnation is “disappointing”, says Nicholas Hyett, Investment Manager at Wealth Club, commented:

“Retailers had a gloomier March than many expected, and overall sales remain 1.2% below their pre-covid peak.

Department stores remain an area of particular weakness, not good news for John Lewis which announced it would not be paying its regular staff bonus for the second year in a row during the month. However, high street shops more broadly have actually performed better, it’s food retail and online shopping that have held back growth.

The disappointing numbers will fuel speculation that the Bank of England will consider interest rate cuts this summer, though are not poor enough to necessitate a move.

Asia-Pacific stock markets are a sea of red today, after Israel carried out military operations against Iran.

Japan’s Nikkei share index has shed 2.3%, or 883 points, to 37,196, away from the record high set last month.

China’s CSI 300 is off 0.8%, and South Korea’s KOSPI is down 1.9%.