The army went on the offensive in South Waziristan, a lawless ethnic Pashtun region on the Afghan border, on October 17 aiming to root out Pakistani Taliban militants behind a wave of violence in urban areas.

The offensive is closely watched by the United States and other powers embroiled in neighboring Afghanistan, as South Waziristan's rugged landscape of barren mountains and hidden ravines has become a global center of Islamist militancy.

Soldiers have been advancing into the militant heartland from three directions and had entered the militant-held village of Makeen, military and intelligence officials said.

"We have not seen much resistance as we entered Makeen," said a senior military official in the region who declined to be identified. "Our troops are now clearing mines and IEDs (improvised explosive devices) and moving forward."

An intelligence agency official said seven militants had been killed in clashes in Makeen, where Pakistani Taliban chief Baitullah Mehsud was killed in an attack by a U.S. missile-firing drone aircraft in early August.

Military spokesmen were not available for comment.

There was no independent verification of the report as journalists are not allowed into the area except on an occasional trip chaperoned by the military.

STOCKS DOWN

Foreign al Qaeda fighters are believed to be hiding in South Waziristan along with thousands of Pakistani insurgents. As the army squeezes militants out of their strongholds they have retaliated with bomb attacks and shootings in urban areas.

In the latest such attack, gunmen opened fire on a vehicle in Islamabad, wounding a brigadier and his driver. Dawn television said the brigadier worked for a military intelligence agency.

A brigadier and his driver were killed in a similar shooting on October 22. Days later gunmen opened fire at a military vehicle but the occupants escaped unharmed.

The violence has unsettled trade on Pakistan's stock market and the main index was 1.54 percent lower at 8,971.59 when the bourse closed for a midday break.

"Ahead of the long weekend, investors are very cautious because of political uncertainty and security fears," said Mohammed Sohail, chief executive at Topline Securities. "Nobody wants to take any risks."

Monday is a public holiday in Pakistan.

Separately, police killed two militants in a clash after they refused to stop their vehicle at a checkpoint in the town of Mansehra, 90 km (56 miles) north of Islamabad.