Exiled Hamas leader Khaled Meshaal says all Palestinian factions are drawing close to agreement on Egypt's proposals for Palestinian reconciliation.

Mr Meshaal has met the head of Egyptian intelligence, Omar Suleiman, to give his answer to the proposals.

He said Hamas have given some thoughts on how the draft might be adjusted - but in principle will return by the end of October to sign a final draft.

Fatah and Hamas have been divided since Hamas took control of Gaza in 2007.

There are signs that after two years of bitter division, they are ready to resolve their many differences.

Mr Meshaal, who had joined a delegation from Gaza, said the Egyptian initiative was a good one and although they have suggested changes they would like to see in the final draft, it is one his side would be prepared to sign.

Fatah, headed by the Palestinian President Mahmoud Abbas, have already agreed to the Egyptian proposal.

We have still to see any real detail on the main areas of contention: how will security be managed within Gaza to incorporate the exiled forces of the Palestinian Authority; will each side be free to campaign if elections are held in 2010; and what about prisoners?

Each side has accused the other of targeting their respective supporters - we are still waiting to see a framework for the release of those prisoners and a timetable.

But irrespective of the outstanding issues, the factions have said they will return by the end of October to agree the final draft ahead of a signing ceremony.

So on this the anniversary of the beginning of the second intifada, there is some cause for cautious optimism - still suspicion on both sides but in the words of the Mr Meshaal, reason to be positive.