EU drug regulator OKs Novartis' meningitis B shot

LONDON (AP) — Europe's top drug regulator has recommended approval for the first vaccine against meningitis B, made by Novartis AG.

There are five types of bacterial meningitis. While vaccines exist to protect against the other four, none has previously been licensed for type B meningitis. In Europe, type B is the most common, causing 3,000 to 5,000 cases every year.

Meningitis mainly affects infants and children. It kills about 8 percent of patients and leaves others with lifelong consequences such as brain damage.

In a statement on Friday, Andrin Oswald of Novartis said he is "proud of the major advance" the company has made in developing its vaccine Bexsero. It is aimed at children over two months of age, and Novartis is hoping countries will include the shot among the routine ones for childhood diseases such as measles.

Novartis said the immunization has had side effects such as fever and redness at the injection site.

Recommendations from the European Medicines Agency are usually adopted by the European Commission. Novartis also is seeking to test the vaccine in the U.S.

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Wall Street Week Ahead: Going off "cliff" with a bungee cord

NEW YORK (Reuters) - The 1987 crash. The Y2K bug. The debt ceiling debacle of 2011.

All these events, in the end, turned out to be buying opportunities for stocks. So will the "fiscal cliff," some investors say as they watch favorite stocks tumble during the political give-and-take happening in Washington.

The first round of talks aimed at avoiding the "fiscal cliff" caused a temporary rise in equities on Friday, signaling Wall Street's recent declines could be a buying opportunity. The gains were small and sentiment remains weak, but it suggests hope for market bulls.

Though shares ended moderately higher on Friday, it was not enough to offset losses for the week. The S&P was down 1.5 percent, while both the Dow and the Nasdaq fell 1.8 percent.

The S&P 500 is down more than 5 percent in the seven sessions that followed President Barack Obama's re-election. Uncertainty arose as attention turned to Washington's task of dealing with mandated tax hikes and spending cuts that could take the U.S. economy back into recession.

Some see the market's move as an overreaction to hyperbolic headlines about policy gridlock in Washington, believing stocks may start to rebound in what should be a quiet few days ahead of the Thanksgiving holiday next Thursday.

"It just doesn't seem to make any sense that you suddenly wake up the day after the election and realize we've got a fiscal cliff," said Krishna Kumar, partner at New York hedge fund Goose Hollow Alpha Advisors.

Not long ago the S&P was on target for its second-best year in the last 10, riding a 17 percent advance in 2012. That's been halved to about 8 percent, which isn't bad but disappointing compared with just a month ago.

Investors have been selling the year's winners. Apple is down 25 percent from its peak above $700. General Electric is down 14 percent; Google has lost 16 percent. Overall, the stocks that make up the top 10 percent of performers in the month prior to Election Day have been the worst performers since, according to Bespoke Investment Group of Harrison, New York.

"I think it's a good opportunity to be long stocks at these levels," said Kumar.

Hikes on capital gains and dividend taxes are on the line, and Obama has dug in his heels on what he sees as a mandate to make the tax code more progressive.

He seems to have the upper hand in dealings with Congress because Republican lawmakers don't want to see tax rates increase, which is what will happen if no solution is found by the beginning of 2013. Republicans don't want to take the blame for driving the economy over the cliff.

The current crisis is similar to last year's fight to raise the U.S. debt ceiling, which led to the downgrade of the United States' top credit rating in early August 2011.

During the dealings, the S&P 500 lost 18.8 percent between its peak in July 2011 and its bottom in August. As the market slid, the political standoff badly hurt investors' confidence in Washington, setting off a spike in volatility.

In the end a deal was announced that raised the ceiling and put off longer-term fiscal decisions until January 1, 2013, setting the stage for today's "fiscal cliff" crisis.

After staying flat through September 2011, the S&P 500 jumped 31 percent between its October low and the end of March.

BUY THE DIP?

Gridlock in Washington and all that could possibly go wrong with the economy if a deal is not reached have grabbed the headlines, but the negotiations leave room for stock market gains. Congressional leaders said Friday they will work through the Thanksgiving holiday recess to find a solution.

"The debate over how to solve (the fiscal cliff) may be more productive than is commonly recognized," said Brad Lipsig, senior portfolio manager at UBS Financial Services in New York.

"The U.S. is facing a major debt overhang, and serious steps toward addressing it might ultimately be viewed as a positive for future growth," he said. "The market may recognize this and, after a time of hand wringing, recover from the concerns with a renewed sense of optimism."

The recent selling took the S&P 500's relative strength index - a technical measure of internal strength - below 30 this week, indicating the benchmark is oversold and due for a rebound.

The RSI in four of the 10 S&P sectors - utilities, telecoms, consumer staples and technology - is below 30 and the highest RSI reading, for the consumer discretionary sector, is below 40, suggesting a bounce is in store.

"What I want to do is what we did during the decline following the budget negotiations in the summer of 2011: The lower the stock market goes, the more I want to own stock," said Brian Reynolds, chief market strategist at New York-based Rosenblatt Securities.

"If we go off the cliff it will be with a bungee cord attached," he said.

KEEP CALM AND HEDGE

Volatility is expected to rise through the end of November and to spike in late December if no agreement on the fiscal cliff is reached in Congress. Alongside comes opportunity for those with high risk tolerance.

"Recently, volatility has increased in the market overall. You can't really pick it up in the VIX yet, but I think as we get through November, I think you're likely to see the VIX be at a relatively higher level," said Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston.

In 2011, the VIX averaged 19.2 in July and 35 in August. So far this month the average is 17.8 and it is expected to spike if negotiations on the cliff drag into late next month.

"Looking at the range of possibilities, I would say any of them would be better than sitting here waiting. I would even put going off the fiscal cliff in that category," said Jill Cuniff, president of Seattle-based Edge Asset Management Inc, which manages about $20 billion.

"But we don't believe Congress will let that happen; there's going to be some middle ground here."

(Reporting by Rodrigo Campos and Jonathan Spincer, additional reporting by Caroline Valetkevitch; Editing by Kenneth Barry)

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Israel hits Hamas buildings, shoots down Tel Aviv-bound rocket

GAZA/JERUSALEM (Reuters) - Israeli aircraft bombed Hamas government buildings in Gaza, and the "Iron Dome" defense system shot down a Tel Aviv-bound rocket on Saturday as Israel geared up for a possible ground invasion.

Hamas, the Palestinian Islamist group that runs the Gaza Strip, said Israeli missiles wrecked the office building of Prime Minister Ismail Haniyeh - where he had met on Friday with the Egyptian prime minister - and struck a police headquarters.

Along the Tel Aviv beachfront, volleyball games came to an abrupt halt and people crouched as sirens sounded. Two interceptor rockets streaked into the sky. A flash and an explosion followed as Iron Dome, deployed only hours earlier near the city, destroyed the incoming projectile in mid-air.

With Israeli tanks and artillery positioned along the Gaza border and no end in sight to hostilities now in their fourth day, Tunisia's foreign minister travelled to the enclave in a show of Arab solidarity.

In Cairo, a presidential source said Egyptian President Mohamed Mursi would hold four-way talks with the Qatari emir, the prime minister of Turkey and Hamas chief Khaled Meshaal in the Egyptian capital on Saturday to discuss the Gaza crisis.

Egypt has been working to reinstate calm between Israel and Hamas after an informal ceasefire brokered by Cairo unraveled over the past few weeks. Meshaal, who lives in exile, has already held a round of talks with Egyptian security officials.

Officials in Gaza said 43 Palestinians, nearly half of them civilians including eight children, had been killed since Israel began its air strikes. Three Israeli civilians were killed by a rocket on Thursday.

Israel unleashed its massive air campaign on Wednesday with the declared goal of deterring Hamas from launching rockets that have plagued its southern communities for years.

The Israeli army said it had zeroed in on a number of government buildings during the night, including Haniyeh's office, the Hamas Interior Ministry and a police compound.

Taher al-Nono, a spokesman for the Hamas government, held a news conference near the rubble of the prime minister's office and pledged: "We will declare victory from here."

Hamas's armed wing claimed responsibility for Saturday's rocket attack on Tel Aviv, the third against the city since Wednesday. It said it fired an Iranian-designed Fajr-5 at the coastal metropolis, some 70 km (43 miles) north of Gaza.

"Well that wasn't such a big deal," said one woman, who had watched the interception while clinging for protection to the trunk of a baby palm tree on a traffic island.

In the Israeli Mediterranean port of Ashdod, a rocket ripped into several balconies. Police said five people were hurt.

Among those killed in airstrikes on Gaza on Saturday were at least four suspected militants riding on motorcycles.

Israel's operation has drawn Western support for what U.S. and European leaders have called Israel's right to self-defense, along with appeals to avoid civilian casualties.

Hamas, shunned by the West over its refusal to recognize Israel, says its cross-border attacks have come in response to Israeli strikes against Palestinian fighters in Gaza.

RESERVIST CALL-UP

At a late night session on Friday, Israeli cabinet ministers decided to more than double the current reserve troop quota set for the Gaza offensive to 75,000, political sources said, in a signal Israel was edging closer to an invasion.

Around 16,000 reservists have already been called up.

Asked by reporters whether a ground operation was possible, Major-General Tal Russo, commander of the Israeli forces on the Gaza frontier, said: "Definitely."

"We have a plan ... it will take time. We need to have patience. It won't be a day or two," he added.

A possible move into the densely populated Gaza Strip and the risk of major casualties it brings would be a significant gamble for Prime Minister Benjamin Netanyahu, favorite to win a January national election.

Hamas fighters are no match for the Israeli military. The last Gaza war, involving a three-week long Israeli air blitz and ground invasion over the New Year period of 2008-09, killed over 1,400 Palestinians, mostly civilians. Thirteen Israelis died.

But the Gaza conflagration has stirred the pot of a Middle East already boiling from two years of Arab revolution and a civil war in Syria that threatens to spread beyond its borders.

"Israel should understand that many things have changed and that lots of water has run in the Arab river," Tunisian Foreign Minister Rafik Abdesslem said as he surveyed the wreckage from a bomb-blast site in central Gaza.

One major change has been the election of an Islamist government in Cairo that is allied with Hamas, potentially narrowing Israel's manoeuvering room in confronting the Palestinian group. Israel and Egypt made peace in 1979.

"DE-ESCALATION"

Netanyahu spoke late on Friday with U.S. President Barack Obama for the second time since the offensive began, the prime minister's office said in a statement.

"(Netanyahu) expressed his deep appreciation for the U.S. position that Israel has a right to defend itself and thanked him for American aid in purchasing Iron Dome batteries," the statement added.

The two leaders have had a testy relationship and have been at odds over how to curb Iran's nuclear program.

A White House official said on Saturday Obama called Turkish Prime Minister Tayyip Erdogan to discuss how the two countries could help bring an end to the Gaza conflict.

Ben Rhodes, White House deputy national security adviser, told reporters that Washington "wants the same thing as the Israelis want", an end to rocket attacks from Gaza. He said the United States is emphasizing diplomacy and "de-escalation".

In Berlin, a spokesman for German Chancellor Angela Merkel said she had spoken to Netanyahu and Egypt's Mursi, stressing to the Israeli leader that Israel had a right to self-defense and that a ceasefire must be agreed as soon as possible to avoid more bloodshed.

U.N. Secretary-General Ban Ki-moon is expected to visit Israel and Egypt next week to push for an end to the fighting in Gaza, U.N. diplomats said on Friday.

The Israeli military said 492 rockets fired from Gaza have hit Israel since the operation began. Iron Dome intercepted another 245.

In Jerusalem, targeted by a Palestinian rocket on Friday for the first time in 42 years, there was little outward sign on the Jewish Sabbath that the attack had any impact on the usually placid pace of life in the holy city.

Some families in Gaza have abandoned their homes - some of them damaged and others situated near potential Israeli targets - and packed into the houses of friends and relatives.

(Additional reporting by Dan Williams and Douglas Hamilton in Tel Aviv, Allyn Fisher-Ilan in Jerusalem, Jeff Mason aboard Air Force One, Writing by Jeffrey Heller; editing by Crispian Balmer)

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The Allure of Mass Apple Gadget Thefts

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Buzzmakers: Lindsay Lohan Comes Clean & Janeane Marries

What had ET readers buzzing this week?

1. Janeane Garofalo: I Didn't Know I was Married!

Sometimes what happens in Vegas actually does stay in Vegas -- at least for two decades. Funny girl Janeane Garofalo is claiming she's been married for 20 years, and didn't even know it!

The Reality Bites actress told the New York Post that she and Big Bang Theory producer Rob Cohen decided to wed at a Las Vegas drive-thru chapel but never thought it would stick. "Rob and I got married, for real, which we had to have a notary dissolve not 30 minutes before we got here tonight," Garofalo said at the New York Comedy Festival reunion for The Ben Stiller Show. "We were married for 20 years until this evening."

Garofalo, 48, further explained, "We got married drunk in Vegas. ... We dated for a year, and we got married at a drive-through chapel in a cab. [We thought], 'You have to go down to the courthouse and sign papers and stuff.' So, who knew? We were married, and apparently now that [Rob] is getting married for real, his lawyer dug up something." Cohen, 63, joked, "I'm gonna get all of that Reality Bites money!"

2. Miley Cyrus: My Dad Knows Nothing

In speaking with ET's Christina McLarty, Miley Cyrus cleared up rumors that she and fiance Liam Hemsworth were planning multiple weddings, started by her dad.

According to Miley, she hasn't even set one wedding date, let alone the three ceremonies that Billy Ray told Us Weekly were going to take place.

"My dad knows nothing," Miley says, pointblank. "I think he's getting cabin fever from [Superstorm Sandy]. He got stuck in his hotel and now he's making up crazy things." Billy Ray has been in NYC, performing in a Broadway production of Chicago.

The 19-year-old singer/actress goes on to admit that the apple doesn't fall far from the tree.

"He does what I do: When he's sitting in a press thing, he's like, 'Let's make this fun. Let's make some stuff up,'" Miley says.

Even with this recent flub, Miley does thank her parents for doing a good job of raising her, saying, "My parents have never been super strict, and people could think that's bad or good, but people that judge me or say that I'm, like, crazy -- they don't know half the stuff their kids are doing."

3. Stephanie Bongiovi Drug Charges Dropped

Stephanie Bongiovi, Jon Bon Jovi's 19-year-old daughter, will not be charged after reportedly overdosing on heroin in her dorm at Hamilton College in New York.

According to a statement from the Kirkland Town Police Department, a female [presumably Bongiovi] was found unresponsive by an ambulance crew sent to the college early Wednesday, after a report that a female had apparently overdosed in the school's largest dorm.

Although Bongiovi and 21-year-old Ian Grant were charged with drug possession, the charges have now been dropped.

Citing section 220.78 titled "Witness or victim of drug or alcohol overdose" of New York State Penal Law -- which states that a person who seeks health care for someone who is experiencing a drug or alcohol overdose or other life threatening medical emergency, as well as the individual who has overdosed or who was experiencing such life threatening medical emergency, can't be prosecuted for the possession of heroin weighing less than 8 ounces or possession of any amount of marijuana -- police said that neither Bongiovi or Grant can be charged.

There has been no statement from Jon Bon Jovi at this time.

4. Dina Lohan Addresses Cocaine Accusation

Did Lindsay Lohan lie about her mother having an alleged cocaine problem? Dina Lohan sets the record straight for ET's Christina McLarty.

"Absolutely lied. We were having an argument, it escalated," explains Dina of their October altercation which was recorded by her father, Michael Lohan. "She just wanted to hurt me at that moment. You know, mothers [and] daughters, we fight."

Dina tells Christina that it pained her to see that private family moment "go public and viral." As for accusations that she uses cocaine, Dina replies, "I hate cocaine. I don't do cocaine."

After Lindsay proclaimed that she was not being truthful about her accusations against her mother about cocaine use, Dina says, "I'm so proud of her for telling the truth because it destroyed me. I mean, I cried for weeks. It just hurt me so bad and she knew how horrible that was, and she came clean and told the truth that she lied. I'm very proud of her for that, which is very difficult to have to do."

Dina adds, "There's so much more to the story than the public sees, and it takes its toll on my children and myself, and we're just trying to move forward." Watch ET for more with our exclusive Dina Lohan interview.

5. Big Bang Cast Leads Call Me Maybe Flash Mob

Fans of The Big Bang Theory might logically assume that the cast of the hit CBS comedy has as many laughs on-screen as off. But now there is concrete proof as Kaley Cuoco just revealed in this clip of cast and crew members surprising showrunners with a flash mob of Carly Rae Jepsen's viral hit Call Me Maybe!

Kaley explains on The Big Bang Theory's Facebook page that the idea was hers and that she recruited her sister Bri to choreograph the impromptu number, which occurred during a taping on October 23 in front of a live audience.

The clip shows how the prank was carried out with secrecy and precision, with the cast re-assembling on the set immediately after the flash mob to resume taping and to hear star Jim Parsons sum up the event with one of his character Sheldon Cooper's favorite words, "Bazinga!"

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EU drug regulator OKs Novartis' meningitis B shot

LONDON (AP) — Europe's top drug regulator has recommended approval for the first vaccine against meningitis B, made by Novartis AG.

There are five types of bacterial meningitis. While vaccines exist to protect against the other four, none has previously been licensed for type B meningitis. In Europe, type B is the most common, causing 3,000 to 5,000 cases every year.

Meningitis mainly affects infants and children. It kills about 8 percent of patients and leaves others with lifelong consequences such as brain damage.

In a statement on Friday, Andrin Oswald of Novartis said he is "proud of the major advance" the company has made in developing its vaccine Bexsero. It is aimed at children over two months of age, and Novartis is hoping countries will include the shot among the routine ones for childhood diseases such as measles.

Novartis said the immunization has had side effects such as fever and redness at the injection site.

Recommendations from the European Medicines Agency are usually adopted by the European Commission. Novartis also is seeking to test the vaccine in the U.S.

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Sarah Jessica Parker & Gerard Butler to Host Nobel Peace Prize Concert

Sarah Jessica Parker and Gerard Butler have been announced as hosts for this year's Nobel Peace Prize Concert, held December 11 in Oslo, Norway to honor the 2012 Nobel Peace Prize laureate, the European Union.

The EU was awarded the prize "for having over six decades contributed to the advancement of peace and reconciliation, democracy and human rights in Europe."

VIDEO: On the Obama Campaign Trail with Sarah Jessica Parker

Among the confirmed performers for the event are Jennifer Hudson and Seal, with more artists to be announced in the coming days.

"It's such a privilege to be part of this year's Nobel Peace Prize Concert," said Parker. "I am honored to be sharing the stage with such amazing performers to promote the power of peace around the world."

RELATED: Gerard Butler Flaunts It For Keeps

Butler said he was "deeply honored" to be named co-host of the concert. "The European Union has shown the world what is possible when forces unite in peace. It's a joy to stand alongside these magnificent artists and celebrate the EU and its contribution to world peace."

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EU drug regulator OKs Novartis' meningitis B shot

LONDON (AP) — Europe's top drug regulator has recommended approval for the first vaccine against meningitis B, made by Novartis AG.

There are five types of bacterial meningitis. While vaccines exist to protect against the other four, none has previously been licensed for type B meningitis. In Europe, type B is the most common, causing 3,000 to 5,000 cases every year.

Meningitis mainly affects infants and children. It kills about 8 percent of patients and leaves others with lifelong consequences such as brain damage.

In a statement on Friday, Andrin Oswald of Novartis said he is "proud of the major advance" the company has made in developing its vaccine Bexsero. It is aimed at children over two months of age, and Novartis is hoping countries will include the shot among the routine ones for childhood diseases such as measles.

Novartis said the immunization has had side effects such as fever and redness at the injection site.

Recommendations from the European Medicines Agency are usually adopted by the European Commission. Novartis also is seeking to test the vaccine in the U.S.

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Wall Street rises as Republicans call talks constructive

NEW YORK (Reuters) - Stocks rose on Friday after Republicans said their meeting with Democratic President Barack Obama about the "fiscal cliff" was constructive and that they were prepared to put higher revenue on the table if there were also significant spending cuts.

All three major U.S. stock indexes erased losses to turn higher following comments by Republican House Speaker John Boehner and others who discussed with Obama ways to avert sharp tax increases and spending cuts that would take effect next year. Analysts have said the fiscal cliff could tip the economy into recession.

"To show our seriousness, we've put revenue on the table as long as it's accompanied by significant spending cuts," Boehner told reporters at the White House.

Republican Senate Minority Leader Mitch McConnell also offered conditional backing for new revenue but said reforms to social safety net programs are also necessary.

"I would call this a PR stunt, but just the fact that people are reacting to it this positively shows that the market is oversold and is seeking a reason to rally," said James Dailey, portfolio manager at TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.

"If we fail to hold onto (gains) and hit new lows later today, then that will definitely be very alarming."

The Dow Jones industrial average <.dji> was up 40.13 points, or 0.32 percent, at 12,582.51. The Standard & Poor's 500 Index <.spx> was up 4.76 points, or 0.35 percent, at 1,358.09. The Nasdaq Composite Index <.ixic> was up 10.09 points, or 0.36 percent, at 2,847.02.

The S&P is down 4.3 percent over the past two weeks, with such sectors as financials <.gspf> and materials <.gspm> among the hardest hit. The S&P and the Dow are currently down about 1.5 percent for the week while the Nasdaq is down about 2.2 percent.

Dell Inc's stock slumped 7.8 percent to $8.81 and was the biggest percentage decliner on the S&P 500 a day after reporting a steep drop in its quarterly profit.

Shares of Penn National Gaming Inc jumped 30 percent to $48.65 after the owner of gaming and pari-mutuel properties said late Thursday it will split its business into two separate publicly traded companies - a gaming focused real estate investment trust and a gaming operator.

Sears Holdings Corp late Thursday reported a quarterly loss that was narrower than expected, but same-store sales fell on weak demand for electronics, sending shares down 16.7 percent to $48.72.

J.M. Smucker Co reported a rise in second-quarter earnings, helped by a drop in commodity costs, but the stock fell 2.9 percent to $82.94.

(Editing by Kenneth Barry)

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Rockets hit near Tel Aviv as Gaza death toll rises

GAZA (Reuters) - Two rockets fired from the Gaza Strip targeted Tel Aviv on Thursday in the first attack on Israel's commercial capital in 20 years, raising the stakes in a showdown between Israel and the Palestinians that is moving towards all-out war.

Earlier, a Hamas rocket killed three Israelis north of the Gaza Strip, drawing the first blood from Israel as the Palestinian death toll rose to 16, five of them children.

Israeli warplanes bombed targets in and around Gaza city for a second day, shaking tall buildings. In a sign of possible escalation, the armed forces spokesman said the military had received the green light to call in up to 30,000 reserve troops.

Israeli Defence Minister Ehud Barak said Palestinian militants would pay a price for firing the missiles.

Plumes of smoke and dust furled into a sky laced with the vapor trails of outgoing rockets over the crowded city, where four young children killed on Wednesday were buried.

The conflict, launched by Israel with the killing of Hamas's military chief, pours oil on the fire of a Middle East already ablaze with two years of revolution and an out-of-control civil war in Syria.

Egypt's new Islamist President Mohamed Mursi, viewed by Hamas as a protector, led a chorus of denunciation of the Israeli strikes by Palestinian allies.

Mursi's prime minister, Hisham Kandil, will visit Gaza on Friday with other Egyptian officials in a show of support for the enclave, an Egyptian cabinet official said. Israel promised that the delegation would come to no harm.

Israel says its attack is in response to escalating missile strikes from Gaza. Israel's bombing has not yet reached the saturation level seen before it last invaded Gaza in 2008, but Israeli officials have said a ground assault is still an option.

Israeli police said three Israelis died when a rocket hit a four-story building in the town of Kiryat Malachi, some 25 km (15 miles) north of Gaza, the first Israeli fatalities of the latest conflict to hit the coastal region.

Air raid sirens sent residents running for shelter in Tel Aviv, a Mediterranean city that has not been hit by a rocket since the 1991 Gulf War. Israeli sources said one rocket landed in the sea, while another missile landed in an uninhabited area of the Tel Aviv suburbs.

The Tel Aviv metropolitan area holds more than 3 million people, more than 40 percent of Israel's population.

"This escalation will exact a price that the other side will have to pay," Barak said in a television broadcast shortly after the strike.

Speaking at the same time in Gaza, Hamas's prime minister, Ismail Haniyeh, urged Egypt to do more to help the Palestinians.

"We call upon the brothers in Egypt to take the measures that will deter this enemy," he said.

After watching powerlessly from the sidelines of the Arab Spring, Israel has been thrust to the centre of a volatile new world in which Islamist Hamas hopes that Mursi and his newly dominant Muslim Brotherhood in Egypt will be its protectors.

"The Israelis must realize that this aggression is unacceptable and would only lead to instability in the region and would negatively and greatly impact the security of the region," Mursi said.

The new conflict will be the biggest test yet of Mursi's commitment to Egypt's 1979 peace treaty with Israel, which the West views as the bedrock of Middle East peace.

The Muslim Brotherhood, which brought Mursi to power in an election after the downfall of autocrat Hosni Mubarak, has called for a "Day of Rage" in Arab capitals on Friday. The Brotherhood is seen as the spiritual mentors of Hamas.

ASSASSINATION

The offensive began on Wednesday when a precision Israeli air strike killed Hamas military mastermind Ahmed Al-Jaabari. Israel then began shelling the enclave from land, air and sea.

At Jaabari's funeral on Thursday, supporters fired guns in the air celebrating news of the Israeli deaths, to chants for Jaabari of "You have won."

His corpse was borne through the streets wrapped in a bloodied white sheet. But senior Hamas figures were not in evidence, wary of Israel's warning they are in its crosshairs.

The Israeli army said 250 targets were hit in Gaza, including more than 130 rocket launchers. It said more than 270 rockets had struck Israel since the start of the operation, with its Iron Dome interceptor system shooting down more than 105 rockets headed for residential areas.

Expecting days or more of fighting and almost inevitable civilian casualties, Israeli warplanes dropped leaflets in Gaza telling residents to stay away from Hamas and other militants.

The United States condemned Hamas, shunned by the West as an obstacle to peace for its refusal to renounce violence and recognize Israel.

"There is no justification for the violence that Hamas and other terrorist organizations are employing against the people of Israel," said Mark Toner, deputy State Department spokesman.

The U.N. Security Council held an emergency meeting late on Wednesday, but took no action.

In France, Foreign Minister Laurent Fabius said: "It would be a catastrophe if there is an escalation in the region. Israel has the right to security but it won't achieve it through violence. The Palestinians also have the right to a state."

"GATES OF HELL"

Israel's sworn enemy Iran, which supports and arms Hamas, condemned the Israeli offensive as "organized terrorism". Lebanon's Iranian-backed Shi'ite militia Hezbollah, which has its own rockets aimed at the Jewish state, denounced strikes on Gaza as "criminal aggression", but held its fire.

Oil prices rose more than $1 as the crisis grew. Israeli shares and bonds fell, while Israel's currency rose off Wednesday's lows, when the shekel slid more than 1 percent to a two-month low against the dollar.

A second Gaza war has loomed on the horizon for months as waves of Palestinian rocket attacks and Israeli strikes grew increasingly intense and frequent. Israeli Prime Minister Benjamin Netanyahu, favored in polls to win a January 22 general election, said the Gaza operation could be stepped up.

His cabinet has granted authorization for the mobilization of military reserves if required to press the offensive, dubbed "Pillar of Defence" in English and "Pillar of Cloud" in Hebrew after the Israelites' divine sign of deliverance in Exodus.

Hamas has said the killing of its top commander in a precise, death-from-above air strike, would "open the gates of hell" for Israel. It appealed to Egypt to halt the assault.

Israel has been anxious since Mubarak was toppled last year in the Arab Spring revolts that replaced secularist strongmen with elected Islamists in Egypt, Tunisia and Libya, and brought civil war to Israel's other big neighbor Syria.

Cairo recalled its ambassador from Israel on Wednesday. Israel's ambassador left Cairo on what was called a routine home visit and Israel said its embassy would stay open.

Gaza has an estimated 35,000 Palestinian fighters, no match for Israel's F-16 fighter-bombers, Apache helicopter gunships, Merkava tanks and other modern weapons systems in the hands of a conscript force of 175,000, with 450,000 in reserve.

(Additional reporting by Jeffrey Heller in Jerusalem, Erika Solomon in Beirut, John Irish in Paris. Marwa Awad in Cairo.; Writing by Douglas Hamilton; Editing by Crispian Balmer and Giles Elgood)

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