GAZA CITY, Jan 23: Palestinian leader Mahmud Abbas was confident Sunday that the armed factions would soon call a formal cease fire as Israeli Prime Minister Ariel Sharon acknowledged a respite in rocket attacks from Gaza.

"The Palestinian national dialogue has made very significant progress and we will reach an agreement concerning this cease fire very soon," he told Palestinian state television.

Abbas has been holding talks with factions such as Hamas and Islamic Jihad over the last five days which all sides have said have taken place in a positive atmosphere. But the newly elected Palestinian Authority president also urged Israel to reciprocate any truce by calling a halt to its military operations and freeing Palestinian prisoners.

"There are also responsibilities on the Israeli side," he said. "They should put an end to attacks against our people and cities and villages, stop going after our wanted people, return people who have been deported to their home towns and give priority to the prisoner issue."

Hamas and Islamic Jihad had earlier denied Israeli claims that they had reached a cease fire agreement with Hamas but a source close to their talks with Abbas said they had agreed to a "cooling down" period.

Both organizations have indicated a willingness to call a cease fire if Israel ends its military activities and releases Palestinian prisoners. Palestinian militant leaders had earlier signalled they would help maintain calm in Gaza for at least a month but denied Israeli accounts that they had committed to a formal cease fire at the behest of the moderate Abbas.

Abbas, elected this month as Yasser Arafat's successor, has been trying to get militants to call off a four-year-old armed revolt so he can start negotiating for statehood in Israeli-occupied territories.

But underscoring the challenge facing peacemakers, a senior aide to Israeli Prime Minister Ariel Sharon said only an interim deal was possible in the foreseeable future. Palestinians seek a final treaty giving them a sovereign state. -Agencies