Looters broke in to the serious crimes unit at the attorney-general's office on Tuesday, AP reported, quoting staff.

They stole computers and pried off bars securing file cabinets containing evidence from the massacres.

The fresh bout of looting and gang fights that erupted in Dili, the capital, on Tuesday left homes and buildings in flames near the presidential  palace, an AFP reporter said.

Ambulances took injured people to a hospital, but it was not immediately clear how many had been hurt in the latest violence.

So far at least 20 people have been killed, thousands displaced and dozens of homes burnt in the violence, sparked by the dismissal last month of about 600 soldiers after they protested against discrimination against easterners in the 1,400-strong army.

East Timor's beleaguered government was due to meet for a second day of crisis talks on Tuesday.

Mari Alkatiri, the prime minister, has been criticised at home and abroad for his handling of the unrest and is said to be at odds with Xanana Gusmao, the president, on how to proceed.

Massacre evidence

Some of the files, found by AP strewn around the ransacked office of the attorney-general, bore the names of well-known massacres in 1999 and contained evidence implicating Indonesia, East Timor's former ruler.

The evidence, which has never been released, included photos of bodies, graves, human remains and statements from people who had seen the killings.

The files are not believed to be part of any pending prosecutions.

Up to 1,500 people died in violence after East Timorese voted overwhelmingly for independence in a UN-organised plebiscite in 1999.

Sporadic gunfire

On Tuesday, sporadic gunfire echoed around the city as ethnic gangs from the east and west of the country defied international peacekeepers to square off around the main road from the airport to the city centre.

Groups of youths wearing balaclavas and carrying traditional  East Timorese swords, machetes and metal pipes set fire to buildings and looted them.

Sword-wielding Timorese youths
are defying peacekeepers

Smoke billowed above several neighbourhoods in Dili as the gangs, the product of massive unemployment and a desperately poor economy, played hide-and-seek with the peacekeepers.

Elsewhere, newly arrived Australian peacekeepers struggled to keep order at a warehouse in Dili where thousands of desperate people attempted to receive free rice.

Thousands of people queued outside the World Food Programme warehouse on Tuesday, most in hope rather than expectation of being given supplies.

"We have had nothing to eat for two days now, just some fruit from the trees," said Maria D'almeida, waiting with her daughter and son. "We can buy food, but from where?"

Failure admission

Jose Ramos Horta, the foreign minister, admitted on Tuesday that the government had failed the people.

"In some areas, particularly in political dialogue in embracing everybody, in resolving problems as they arise, well the government has failed miserably," Ramos-Horta told Australia's Nine Network.

"We have failed to embrace people who disagree with the government, we have failed in addressing the problems in the military and in the police, even though we knew about them."

Ramos-Horta said the authorities
failed to address police problems

A senior commander of the 2,500-plus strong force from Australia, Malaysia and New Zealand said they were controlling the violence and it was safe for people to return to their homes.

"We are patrolling every neighbourhood in this town," Lieutenant-Colonel Mick Mumford said. "We can't put a soldier on every street, in every suburb ... but I can assure you that soldiers are going through them."

He said his soldiers had confiscated many weapons, but made no arrests.

"It is fair to tell people to go home because it is safe," he said.

But residents were less sure. "As soon as the soldiers move somewhere else, then they come back," said Eduardo Villes, who had formed a vigilante squad with neighbours to protect property.

Possible reshuffle

The Red Cross says more than 40,000 have been displaced by the violence and food shortages were being felt in the capital.

Australian peacekeepers are
struggling to quell the violence

Despite the presence of foreign troops, shopkeepers were reluctant to open for business.

Apart from some coffee production, East Timor has virtually no economy but has signed oil and gas exploration deals for resources in the Timor Sea.

An election is due to be held early next year, but many Timorese and diplomats believe that Alkatiri cannot last that long.

Ramos-Horta, the foreign minister, said Tuesday's talks might result in a cabinet reshuffle but he did not think that Alkatiri, whom he believed still had support within the ruling Fretilin party, would resign.

He said: "We have to bear in mind that while a vast majority of people wish him [Alkatiri] to go, we do not know what would be the reaction of the Fretilin community."