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Israeli Forces Push Deeper into Gaza as Hamas Steps up Attacks

Israeli ground troops moved into the outskirts of southern Gaza City Sunday morning, sparking fire-fights with Palestinian militants as they edged closer to densely-populated areas, witnesses said.

Israeli infantry soldiers during operations inside the Gaza Strip during the ground offensive

Israeli troops are now battling Hamas militants in the streets of southern Gaza City

Israeli infantry units backed by tanks pushed deeper into Gaza's main city overnight near the southern Tal al-Hawa neighborhood, encountering roadside bombs, mortar and gunfire from Palestinian fighters, witnesses said.

The troops withdrew at daybreak, but panicked residents fled from the area, clutching babies, toddlers and hurriedly-packed bags after a sleepless night that saw some of the fiercest confrontations so far, witnesses said.

Some 12 Palestinian gunmen were reportedly killed in the clashes, once the Israeli tanks and infantry pulled back from the Sheikh Ajleen neighborhood to the former Israeli settlement of Netzarim, south of Gaza City.

Israel has so far not sent troops into the neighborhoods and refugee camps in the Gaza Strip, but Israeli media reports say that the third stage of the Israeli ground operation in the Strip would see the troops forced to take on gunmen in the Strip's main cities and camps.

A further 12 Palestinians were killed in the 60 overnight bombing raids carried out by the Israel Air Force. In all, at least 26 Palestinians have been killed in clashes on Sunday, medics said.

An Israeli military statement said the targets attacked included the house of the commander of the Hamas military wing in the Gaza Strip. It was unclear whether Ahmed Jabri was at home when his house was hit and whether he was wounded in the strike. Since the Israeli offensive began on December 27, Hamas leaders have gone underground.

Other targets hit in the overnight strikes included, according to the Israeli military, 10 Hamas arms depots, 10 squads of armed gunmen, and nine tunnels under the Gaza-Egypt border used to smuggle weapons into the enclave, the statement said.

Israeli warplanes bombed about 60 targets throughout the Gaza Strip overnight, hitting weapon depots and smuggling tunnels as well as a mosque that was allegedly used to store weapons and train fighters, the army said.

Hamas says no dialogue while fighting continues

Palestinian Islamic Jihad militants stand with their weapons

Hamas and Islamic Jihad will fight on, their leaders say

With the body count spiraling, the exiled political chief of Hamas, Khaled Meshaal, remained defiant, vowing in an address televised late Saturday night the Islamists would not negotiate "under fire."

Branding the Israeli operation a "holocaust," Meshaal said "the enemy has totally failed" and "created resistance in every house."

He once again ruled out a permanent truce with Israel, a country his movement is pledged to destroying.

"We will not accept a permanent truce because ... as long as there is an occupation there is a resistance," he said, adding that his group will not hold talks on a temporary truce until Israel stops its offensive.

"We will not accept negotiations on a truce under fire," he said. Israel had wrecked "the last chance for a settlement" with its assault on Gaza.

Militants retaliate with increased rocket attacks

Palestinian militants fire Qassam rockets from Gaza over the Israeli border

Israel came under rocket attack as its troops advanced

Hamas militants in the Strip, for their part, continued launching rockets at southern Israel, with two Grad missiles hitting the city of Beersheba. Hamas and its allies fired seven rockets into Israel, with the projectiles slamming as far as 40 kilometers (24 miles) inside the Jewish state, without causing injuries.

The missiles landed just as 11th graders and 12th graders in the city were returning to school, after a two-week suspension of classes because of the Hamas rocket attacks.

High school classes also resumed in other cities which have become frequent targets of Hamas rockets, with most studies taking place in bomb shelters or in special protected buildings.

Since the Israeli offensive began on December 27, at least 879 people have been killed, including 275 children, and another 3,620 wounded, according to Gaza medics.

Ten Israeli soldiers and three civilians have been killed in combat or in rocket attacks since the operation began, as Palestinian militants have fired more than 600 rockets, some of them penetrating deeper than ever inside Israel.

As the two sides fought on, ignoring world pleas to stop the 16-day-old war that has killed more than 875 people, Egypt was keeping up efforts to broker a truce in Israel's deadliest ever assault on the impoverished Gaza Strip.

Civilians continued to fall victim to Israel's onslaught on the Palestinian enclave, one of the world's most densely populated places where every other person of the 1.5 million population is under 18 years of age.

Two women and four children were killed in a strike on a house in Beit Lahiya, medics and witnesses said. Twelve bodies were pulled from the rubble in Tal al-Hawa, 10 of them fighters, medics said.

Israel closer to acieving its objectives: Olmert

Israeli Prime Minister Ehud Olmert, right, with Foreign Minister Tzipi Livni

Livni and Olmert say their objectives have almost been met

Prime Minister Ehud Olmert said the Jewish state is approaching the goals it had set for the offensive that it launched on December 27 in response to rocket fire, but said fighting will continue for the time being.

"This is a time to translate our achievements into the goals we have set," Olmert said at the start of a cabinet meeting in Jerusalem.

"Israel is approaching these goals, but more patience and determination are required in order to reach these goals" and "change the security reality in the south in a way that will allow our citizens to live in security and stability over a long period of time," he said.

Defense Minister Ehud Barak told reporters that Israel is "examining the diplomatic channel" while continuing its offensive.

"There's no contradiction between the two," said Barak, who is due to again send senior aide Amos Gilad to Cairo in coming days for Egyptian-led talks on ending the war.

Egypt has been spearheading Western-backed efforts to end the fighting, calling for an immediate truce, opening Gaza's border crossings, preventing arms smuggling and a call for Palestinians to resume reconciliation talks.

Both Hamas and Israel have brushed aside a UN Security Council resolution which last Thursday called for an immediate truce in the territory.

The conflict has sparked worldwide pro-Palestinian demonstrations, including rallies in Europe that drew tens of thousands of protesters.

On Sunday, 20,000 Indonesian Muslims rallied against the war.

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