By Guled Mohamed

MOGADISHU, July 18 (Reuters) - At least three people including a Somali soldier died after grenades were thrown at troops patrolling Mogadishu's Bakara market on Wednesday, witnesses said.

"Two died from the grenade blast aimed at troops," taxi driver Ali Adan told Reuters by telephone.

"It's total chaos here. Troops are shooting at anyone on sight. There are some casualties but I don't know how many."

Residents said the soldier died from a grenade attack early on Wednesday, while at least four other civilians were killed in a blast on the same market late Tuesday.

The latest violence came a day before a much-anticipated peace meeting was due to resume in the volatile capital, where attacks by insurgents targeting government troops and their Ethiopian allies have become a daily feature of life.

Mortar blasts marred the opening of the meeting on Sunday, which organisers adjourned until Thursday, saying they were waiting for more delegates to arrive.

Mohamed Ali Nur, Somalia's envoy to Kenya, denied reports the violence caused the postponement of talks seen as the interim government's best hope to end 16 years of chaos, triggered when warlords ousted the last national president in 1991.

"Some spoilers who don't want peace and good governance in Somalia are trying to spoil the conference ... we will continue," he told a news conference in Nairobi.

"We expect a good outcome."

Since seizing Mogadishu from an Islamist movement in December with Ethiopian military help, the government has faced roadside bombings, Iraqi-style assassination attempts on senior officials and suicide attacks by Islamist remnants.

Among the wounded in Wednesday's blast was a technician repairing phone lines in the busy market when he was blown off his ladder by the intensity of the blast.

"The technician is bleeding profusely in the mouth. I think he lost some teeth because he fell hard on his face," witness Abdi Ahmed told Reuters.

As violence escalates around the sprawling Bakara, one of Africa's biggest arms markets, traders are thinking of moving their wares to other markets in the bullet-riddled city of one million people.

"I have not sold anything this month," said shopkeeper Muse Abdi, a father of nine. "I have no option but to move my shop otherwise my kids will go hungry. I was optimistic when the government took over the city. It's so sad." (Additional reporting by Wangui Kanina in Nairobi)

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