Senior members of Egyptian President Hosni Mubarak's ruling party resigned on Saturday, but demonstrators staging a 12th day of anti-regime protests rejected the shuffle as a cosmetic measure.
The resignations came after Mubarak huddled with his new government for the first time on, and an official said that the country's stock exchange would remain closed indefinitely as the stand-off continues.
State television said that the executive committee of the ruling National Democratic Party had resigned en masse. Among those stepping down was Mubarak's son Gamal, once viewed as his heir apparent, state television reported.
Hossam Badrawi -- reputed to have good relations with opposition figures - will take over as NDP secretary general and political bureau chief, it said.
US President Barack Obama's administration welcomed the reshuffle.
"We view this as a positive step toward the political change that will be necessary, and look forward to additional steps," a Washington official said.
But protesters rejected it as a meaningless gesture that showed the regime was in trouble.
"Some people say it is cleaning out but I believe these are cards they are throwing on the table to please the street, it's like a striptease show," said Mahmud Momen, a 46-year-old businessman.
Farid Ismail, a prominent member of the opposition Muslim Brotherhood, said that the resignations were a sign of the regime's demise.
"The regime's pillars are crumbling. This means that the revolution of the youth has caused a large earthquake and many of the regime's symbols are falling - it is trying to save itself," he declared.
The political turmoil in Cairo loomed large over international meetings in Munich, Germany, where Obama's special envoy Frank Wisner said Mubarak should stay in office during a democratic transition.
"The president must stay in office in order to steer those changes through," Wisner, who met Mubarak this week, told the Munich Security Conference via video link, describing the leader as an "old friend" of the United States.
"President Mubarak's continued leadership is critical," he said.
But officials in Washington quickly distanced themselves from Wisner's remarks, saying he spoke as a private citizen.
Also in Munich, for a meeting of the Middle East diplomatic Quartet, US Secretary of State Hillary Clinton warned that the region faced a bumpy road on the transition to democracy.
And she praised the "restraint" shown by the Egyptian security forces during a mass demonstration on Friday.
At least 300 people are believed to have been killed and thousands injured since the protests began on January 25, according to the United Nations high commissioner for human rights.
With big crowds swelling anew in Tahrir Square, Mubarak met for the first time with the government he swore in five days earlier.
Present were his new prime minister Ahmed Shafiq, the ministers of petroleum, trade, finance and social solidarity, and the head of the central bank, state news agency MENA reported.
Elsewhere in Egypt, a pipeline in northern Sinai sending gas to Jordan was attacked, officials said, prompting gas supplies to Israel to be halted also. It was unclear if the attack was linked to the anti-regime protests.
A blast followed by a fire was reported at a Coptic church in Rafah bordering the Gaza Strip, although a local official denied an explosion was the cause.
France said that it had suspended sales of arms and riot police equipment to Egypt two weeks ago after the outbreak of the mass protests.
Despite a return to relative calm, Egypt's stock exchange will not reopen on Monday, as previously announced, state news agency MENA reported. Banks, however, were due to resume business on Sunday.
Mubarak, 82, who has ruled the Arab world's most populous nation for 30 years, has said he is "fed up" and pledged he will not stand in September's election, but has said he will stay in power until then, while calm is restored.
But protesters - inspired by the downfall of Tunisia's long-time president in January - want him out immediately, and the European Union and the United States are stepping up pressure for a transition to begin.
The Muslim Brotherhood, which is refusing to negotiate with the government, has kept a low profile because it does not want the revolt to be seen as an Islamic revolution, a leader said in an interview to be published on Monday.
"It is an uprising of the Egyptian people," Rashad al-Bayoumi, a spokesman for the influential group, told the German weekly Der Spiegel.
George Ishaq of the opposition group Kefaya ("Enough" in Arabic), speaking on Al-Jazeera television, said that his secular group was opposed both to a religious state in a post-Mubarak Egypt and to foreign intervention.
He denied any rift between the uprising's secular and Islamic members. "The opposition has demands which should be taken into account... The demands are united and we will hold on to them," he said.
Citing unnamed US and Egyptian officials, the New York Times reported that new vice president Omar Suleiman and senior Egyptian military leaders are exploring ways for Mubarak to make a graceful exit.
Rather than resign immediately, Mubarak's powers would be scaled back, enabling the creation of a transitional government headed by Suleiman, the former intelligence chief, to negotiate reforms with the opposition.
In Munich, Clinton warned that a transition in Egypt could "backslide into just another authoritarian regime."
"Revolutions have overthrown dictators in the name of democracy, only to see the political process hijacked by new autocrats who use violence, deception, and rigged elections to stay in power, or to advance an agenda of extremism."
But she told her Quartet partners "the status quo is simply not sustainable... Across the region, there must be clear and real progress toward open, transparent, fair, and accountable systems."