UKRAINE'S government has signalled its intention to press on with its campaign against pro-Russian rebels as the militants, regrouping after losing their stronghold, said they were preparing to fight back.

President Petro Poroshenko, drawing confidence from the fall of the rebel bastion of Slaviansk, named a new military chief in the east following his appointment of a new defence minister who ruled out negotiations until separatists lay down their arms.

One rebel leader played down the loss of Slaviansk and said the hundreds of fighters who were able to move from the town to the regional capital Donetsk were preparing a command structure to defend that city and hit back.

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Alexander Borodai, prime minister of the self-proclaimed Donetsk People's Republic, said: "We are not preparing ourselves for a siege. We are preparing ourselves for action."

In Luhansk, a city on the border with Russia where rebels control key buildings, two people in a minibus were killed by a shell.