(Adds New York police on new Islamic State video, White House on no credible threat to U.S.)
* At least two die, eight arrested in pre-dawn raid
* Group was planning to attack business district -sources
* Raid aimed at alleged Nov. 13 attack mastermind
* Unclear if Belgian militant among those killed
By Emmanuel Jarry and Antony Paone
SAINT DENIS, France, Nov 18 (Reuters) - A suicide bomber blew herself up in a police raid on Wednesday that sources said had foiled a jihadi plan to hit Paris's business district, days after a wave of attacks killed 129 across the French capital.
Police stormed an apartment in the Paris suburb of St. Denis before dawn in a hunt for Abdelhamid Abaaoud, a Belgian militant accused of masterminding the bombings and shootings, but it was unclear whether he had died in the assault.
Heavily armed officers triggered a massive firefight and multiple explosions when they entered the building. Eight people were arrested, and forensic scientists were working to confirm if two or three militants had died in the violence.
"A new team of terrorists has been neutralised," Paris Prosecutor Francois Molins told reporters on Wednesday evening, saying police fired 5,000 rounds of munitions into the apartment, which was left shredded by the raid, its windows blown out and the facade riddled with bullet impacts.
"This commando could have become operational," Molins said.
A source close to the investigation said the dead woman might have been Abaaoud's cousin, while the Washington Post quoted senior intelligence officials as saying Abaaoud himself had died in the shoot-out.
Molins said none of the bodies had been identified, adding only that Abaaoud was not among those detained.
Two police sources and a source close to the investigation told Reuters the St. Denis cell was planning a fresh attack. "This new team was planning an attack on La Defense," one source said, referring to a high-rise neighbourhood on the outskirts of Paris that is home to top banks and businesses.
In another sign that Islamic State supporters were active elsewhere in France, a Jewish teacher was stabbed in the southern French port of Marseilles by three people professing solidarity with the militant group, prosecutors said.
One of the three wore an Islamic State T-shirt, while another attacker showed a picture on his mobile telephone of Mohamed Merah, a homegrown Islamist militant who killed seven people in attacks in southern France in 2012. The Marseilles teacher's life was not in danger.
Police were led to the apartment in St. Denis following a tip that Abaaoud, 28, previously thought to have orchestrated the Nov. 13 attacks from Syria, was actually in France.
Investigators believe the attacks - the worst atrocity in France since World War Two - were set in motion in Syria, with Islamist cells in neighbouring Belgium organising the mayhem.
Molins said an initial attempt to blow in the front door had failed because it was metal-plated, giving those inside time to pick up their guns and fight back. The confrontation was so violent part of the apartment building was in danger of collapsing.
Local resident Sanoko Abdulai said that during the operation a young woman detonated an explosion.
"She had a bomb, that's for sure. The police didn't kill her, she blew herself up," he told Reuters. Five police officers and a passerby were injured in the assault. A police dog was also killed.
Islamic State, which controls swathes of territory in Syria and Iraq, has claimed responsibility for the Paris attacks, saying they were in retaliation for French air raids against their positions over the past year.
Anxiety has mounted across the globe about the threat of more attacks.
Police in New York, the target of the Sept. 11, 2001, suicide plane attacks, said they were aware of a newly released Islamic State video suggesting America's most populous city was a potential target.
A clip of the six-minute video provided by the SITE Intelligence Group, which tracks militant groups, shows a brief glimpse of Times Square and then a suicide bomber holding what appears to be a trigger.
"While there is no current or specific threat to the city at this time, we will remain at a heightened state of vigilance," Deputy New York Police Commissioner Stephen Davis.
U.S. President Barack Obama's top adviser on counterterrorism, Lisa Monaco, told cable channel MSNBC there was "no credible threat" against the United States at the moment.
Sweden raised its threat level by one step to four on a scale of five. The high-speed Eurostar train that connects Paris and London briefly suspended check-ins at Paris's Gare du Nord, and several German Bundesliga soccer teams said they were beefing up security before their matches.
SEEKING GLOBAL COALITION
France has called for a global coalition to defeat the extremists and has launched three air strikes on Raqqa, the de-facto Islamic State capital in northern Syria, since the weekend. Russia has also targeted the city in retribution for the downing of a Russian airliner last month that killed 224.
The Syrian Observatory for Human Rights monitoring group said on Wednesday the bombardments had killed at least 33 Islamic State militants over the past three days.
Citing activists, the Observatory said Islamic State members and dozens of families of senior members had started fleeing Raqqa to relocate to Mosul in neighbouring Iraq.
The Russian air force on Wednesday carried out a "mass strike" on Islamic State positions around Syria, including Raqqa, Russian news agencies reported.
Paris and Moscow are not coordinating their air strikes in Syria, but French President Francois Hollande is due to meet Russian President Vladimir Putin in Moscow on Nov. 26 to discuss how their countries' militaries might work together.
Two days before that, Hollande will meet in Washington with U.S. President Barack Obama, who says Russia must shift its focus from "propping up" Syrian President Bashar al-Assad.
Russian Foreign Minister Sergei Lavrov said on Wednesday that Western nations had to drop their demands for Assad's exit if they wanted to build a coalition against Islamic State.
Russia is allied to Assad, but the West says he must go if there is to be a political solution to Syria's prolonged civil war. Hollande said countries should set aside their sometimes diverging national interests to battle their common foe.
French prosecutors have identified five of the seven dead assailants from Friday - four Frenchmen and a man fingerprinted in Greece last month after arriving in the country via Turkey with a boatload of refugees fleeing the Syria war.
Police believe two men directly involved in the assault subsequently escaped, including Salah Abdeslam, 26, a Belgian-based Frenchman accused of having played a central role in both planning and executing the deadly mission.
French authorities said on Wednesday they had identified all the victims from Friday's attacks. They came from 17 different countries, many of them young people out enjoying themselves at bars, restaurants, a concert hall and a soccer stadium.
Empowered by a state of emergency introduced in France after the attacks, police have made hundreds of raids across the country over the past three days, arresting 60 suspects, putting 118 under house arrest and seizing 75 weapons.
Until Wednesday morning, officials had said Abaaoud was in Syria. He grew up in Brussels, but media said he moved to Syria in 2014 to fight with Islamic State. Since then, he has travelled back to Europe at least once and was involved in a series of planned attacks in Belgium foiled by the police last January.
(Additional reporting by Andrew Callus, Matthias Blamont, Marine Pennetier, Emmanuel Jarry, Marie-Louise Gumuchian, Jean-Baptiste Vey, Chine Labbé, Svebor Kranjc, John Irish in Paris, Alastair Macdonald and Robert-Jan Bartunek in Brussels, and Matt Spetalnick in Manila, Victoria Cavaliere and Dan Whitcomb in Los Angeles, Amran Abocar in Toronto and Dan Wallis in Denver; Writing by Frank McGurty in New York and Roberta Rampton, Patricia Zengerle, Lesley Wroughton and Peter Cooney in Washington; Editing by Philippa Fletcher, Richard Balmforth and Ken Wills)
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