(Updates death toll, adds second bombing)

By Paul Tait

BAGHDAD, Feb 1 (Reuters) - At least 35 people were killed when a bomb hidden inside a box of birds exploded at a popular pet market in central Baghdad on Friday, police said, the latest strike at one of the capital's most popular gathering places.

Another 75 were wounded in the blast at the crowded Ghazil market, which has been bombed at least three times in the past year. Ambulances and police were trying to evacuate the wounded, witnesses said.

In another attack, eight people were killed and 10 wounded at a separate bird market in southern Baghdad, police said.

While attacks continue to fall across Iraq, the latest blasts underscore U.S. military warnings that a return to the violence that took Iraq to the brink of sectarian civil war is still possible.

Witnesses said ambulances were trying to push through packed streets to get to the scene after the Ghazil blast, one of the deadliest bombings in Baghdad in several months.

Police and civil defence officials were piling wounded into cars and the back of pick-up trucks while U.S. soldiers helped secure the area, witnesses said.

The market only opens on Fridays and is a popular spectacle visited by hundreds of Baghdadis.

On Nov. 23, a bomb also hidden inside a box of birds killed 13 people and wounded 57 in the Ghazil market, which sells a colourful range of creatures from guard dogs and monkeys to parrots, pigeons and tropical fish.

That bombing was a big psychological blow for residents of the capital who had begun returning to the streets of Baghdad after security crackdowns last year helped arrest a slide towards all-out sectarian civil war.

The market has been bombed a number of times, with about 10 people killed in two separate blasts there in January and February last year.

Violence has fallen sharply across Iraq, with the number of attacks down 60 percent since last June, allowing Iraqis to venture out to markets and restaurants as they attempt to return to a semblance of normal life.

The declining violence has been attributed to an 30,000 extra troops, which became fully deployed last June, and the growth of primarily Sunni Arab neighbourhood police units.

The units sprang up in western Anbar province in late 2006 and helped drive al Qaeda out of their former stronghold in western Anbar province.

Despite the improved security, U.S. commanders warn that Sunni Islamist al Qaeda, blamed for most large-scale attacks in Iraq, remains a dangerous enemy. Al Qaeda has regrouped in the north after being driven out of Anbar and from around Baghdad.

On Thursday, Iraqi government figures showed that 466 Iraqi civilians had died violently in January, more than 76 percent lower than the 1,971 killed in January 2007. A total of 481 were killed in December.

(Additional reporting by Wisam Mohammed; Writing by Paul Tait; Editing by Dean Yates)

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