The Algerian army is hunting a group of armed Islamic rebels hiding in the eastern scrubland that is believed to count two al-Qaida members among its ranks.

The Algerian President says he will not step down amid criticism of his management of two months of rioting that has left dozens dead.

Forty Algerian soldiers have been killed during clashes with Islamic militants, in one of the bloodiest attacks on the armed forces since the start of a nine-year insurgency today.