A damaged cafe is seen after a blast in the southern Moroccan city of Marrakesh April 28, 2011.[Photo/Agencies]

MARRAKESH - An explosion killed 15 people, including foreigners, on Thursday in a busy cafe in the Moroccan tourist destination of Marrakesh, and authorities said the initial signs were that it was a criminal act.

The blast ripped through the second storey of a cafe overlooking Marrakesh's Jamaa el-Fnaa square, a spot that is usually bustling with foreign tourists and local vendors.

Officials did not say if they suspected the involvement of Islamist militants. The militants' last big attack was a series of suicide bombings in Morocco's commercial capital, Casablanca, in 2003 in which more than 45 people were killed.

Two people in Marrakesh told Reuters the explosion was the work of a suicide bomber, but there was no immediate confirmation of this.

"I heard a massive blast. The first and second floors of the building were destroyed," said one local woman, who did not want to be identified. "Some witnesses said they have seen a man carrying a bag entering the cafe before the blast occurred."

Morocco's main stock exchange, the Casablanca bourse, was down 3.3 percent by 1333 GMT.

"People are panicking. This is a terrorist act and it will affect the economy and tarnish the country's image. Local investors are selling," said a trader on the bourse.

A Reuters photographer at the scene of the blast said he saw rescue workers pulling dismembered bodies from the wreckage of the Argana cafe.

The roof over the restaurant's upstairs terrace had been ripped off by the force of the explosion and pieces of plaster and electrical wires hung from the ceiling.

"I heard a very loud blast in the square. It occurred inside Argana cafe. When I approached the scene, I saw shredded bodies being pulled out of the cafe," the photographer said.

"The first floor bore the brunt of the damage while the ground floor was almost intact ... There are a lot of police who, with forensics, are sifting through the debris."

The Interior Ministry issued a statement saying the explosion killed 15 people, including an undisclosed number of foreigners, and injured another 20 people.

"Early evidence collected at the site (of the explosion) indicates that it was a criminal act," the ministry said in the statement carried by the official MAP news agency.

An official source had earlier told Reuters it appeared the blast was caused by gas canisters in the cafe catching fire.

The official news agency said an investigation was under way to determine the cause of the explosion.

The blast is likely to hurt Morocco's tourism trade -- a major source of revenue -- which is already struggling to recover from the effects of the global downturn.

"Marrakesh is the main tourist destination in Morocco and Argana Cafe has been one of the most popular cafes in the square," said a Frenchman who owns a restaurant in the city.

"You can't find a more emblematic target than Jamaa el-Fna square ... With this attack and amid the worrying unrest in the region, tourism will hit the doldrums for some time," said the businessman, who did not want his name published.