Hamas steps up rocket fire, Israel says ready for escalation

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* Hamas claims firing dozens of rockets at Israel * Israel calls up reservists, says ready to fight * Air raid sirens wail in Tel Aviv, Jerusalem (Recasts with surge in rocket fire, Hamas rocket fire claim, details) By Nidal al-Mughrabi GAZA, July 7 (Reuters) - Hamas stepped up rocket fire at southern Israeli towns and Israel called up reserve troops on Monday in anticipation of a possible escalation of hostilities with the Islamist group that dominates the Gaza Strip. Israel said more than 40 rockets were launched as militants' funerals were held in Gaza.

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