By Sahal Abdulle

MOGADISHU, April 3 (Reuters) - The United States, Europe and African countries called on Tuesday for all fighting to stop in Somalia after battles in Mogadishu killed hundreds and the rest of the country struggled with an influx of 100,000 refugees.

At a meeting in Cairo, the International Contact Group on Somalia called "on all parties to cease immediately all hostilities", which aid agencies have characterised as the bloodiest clashes in Mogadishu in 15 years.

A truce held for a second day on Tuesday as elders from the coastal capital's dominant clan, the Hawiye, met Ethiopian commanders for several hours in Somalia's coastal capital.

The two sides agreed to maintain the ceasefire to allow bodies to be removed and to return for more talks on Thursday.

"This was more importantly a confidence-building meeting," meeting facilitator Ahmed Abdisalan said.

The interim government said it had not been involved in the Mogadishu meeting, but hoped that it had encouraged members of the clan -- including those from a feared Islamist unit, the Shabaab -- who were firing at government troops to stop.

"This is a victory for the population of Mogadishu. Hopefully it will stick," Interior Minister Mohamed Mohamud Guled told Reuters.

More bodies were expected to be unearthed in crumpled buildings after four days of battles that ended on Sunday.

Scores of fighters also died in the offensive by the Somali government and Ethiopian troops against the clan and insurgents loyal to Islamist courts ousted from power in the New Year. The battles in residential areas included ferocious artillery fire.

Despite the truce, fighters on both sides were still dug in around Mogadishu and there were fears of a swift resumption of fighting in a city known for hair-trigger clashes.

The local Elman Peace and Human Rights Organisation said the battles killed 381 civilians and wounded 565, in the first comprehensive count of casualties.

The International Committee of the Red Cross said it had counted 700 wounded in three city hospitals it supplies.

Elman's chairman, Sudan Ali Ahmed, told Reuters the toll would rise: "There are still some wounded as well as dead bodies stuck in their houses where no one can go."

Ethiopia says 200 insurgents, drawn from clan militias and the militant Islamist group, were killed in an onslaught intended to obliterate the insurgency.

100,000 FLEE

The Contact Group -- which includes Britain, Italy, Kenya, Norway, Sweden, Tanzania, the United States, the European Union, the United Nations, the African Union and the Arab League -- condemned the "actions of extremists and terrorists who continue to threaten" the government.

"(It) supports efforts to counter these threats, while ensuring that action is proportionate, avoids civilian casualties and prevents the disruption of humanitarian efforts," the group said in a statement.

Nearly 50,000 people have fled the city in the past 10 days, the United Nations said, bringing the total to almost 100,000 -- one tenth of Mogadishu's population -- since February.

The U.N. refugee agency UNHCR said the exodus was comparable to conditions after dictator Mohamed Siad Barre was ousted in 1991, ushering in 15 years of anarchy.

Refugees have been greeted with hostility in many areas outside the capital, the UNHCR said, including being charged extortionate rents for shelter and even shade.

Pressure on scarce resources, the UNHCR said, could fuel more conflict. In one example, residents near Afgooye queued for up to 12 hours to pay water prices that had shot up 20-fold.

Ethiopia joined President Abdullahi Yusuf's interim government in late 2006 to topple the Islamist courts militia, who had controlled most of south Somalia for six months.

The Islamists, who deny Ethiopian and U.S. accusations of al Qaeda links, were roundly defeated but have now regrouped.

The Contact Group said "all relevant groups" should be represented at a proposed reconciliation meeting to end the conflict but did not address the question of whether the clan militias and allies of Islamic Courts would play a role.

Some 1,200 Ugandan soldiers, the advance guard of a planned African Union (AU) peacekeeping force, have failed to stem the violence and instead themselves become an insurgent target. (Additional reporting by Andrew Cawthorne in Nairobi, Richard Waddington in Geneva, Jack Kimball in Asmara and Aziz El Kaissouni in Cairo)

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