POLICE are now investigating a stabbing spree in Finland that left two people dead as a terrorist attack, identifying a suspect as an 18-year-old Moroccan citizen.

“The incidents were initially investigated as murders, but in light of further information received during the night, the offences include now murders with terrorist intent and their attempts,” police said in a statement.

The suspect’s “identity is known to the police. He is an 18-year-old Moroccan citizen,” it said, providing no other details about him.

Police shot and wounded the knife-wielding suspect on Friday, arresting him minutes after an afternoon stabbing rampage at a busy market square in Turku in southwestern Finland. Two people died in the attack.

Police on Saturday raised the number of injured in the attack from six to eight, adding that the injured included an Italian national and two Swedes. The other victims were all Finns.

Police also arrested five people in a Turku apartment overnight. “There was a raid and we have now six suspects in custody, the main suspect and five others,” detective superintendent Markus Laine of the National Bureau of Investigation (NBI) told AFP.

“We are investigating the role of these five other people but we are not sure yet if they had anything to do with (the attack)... We will interrogate them, after that we can tell you more. But they had been in contact with the main suspect,” Laine said.

Police have said they are collaborating with the Finnish Immigration Service and international authorities in their investigation.

“Several national authorities are participating in the investigation. We are also working together with our foreign colleagues to investigate the case,” it said in a tweet.

The suspect is being treated in hospital in intensive care for a gunshot wound to the thigh.

The motive for the attack was not yet known.

“We haven’t yet interrogated the main suspect because of his medical condition,” Laine said.

Police also said they had impounded a white Fiat Ducato van suspected of being tied to Friday’s stabbing, but provided no other information about how it was linked.

The attack occurred at two market places close to each other in the city centre - Kauppatori, known in English as Central Market Square, as well as the Puutori Market Square, police said.

“At this stage, there is only one suspect and we are investigating whether there are more people involved ... but it looks likely (he was alone),” said Markus Laine from the National Bureau of Investigation at a news conference. “At this stage, we do not investigate this (as a terrorism attack) but the possibility has not been ruled out.”

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Police shot the suspect in the leg and he was later taken to hospital. They launched a manhunt for other possible attackers.

“We can not exclude the events being linked to international terrorism,” Chief of police Seppo Kolehmainen said. “We have a heightened awareness level of terrorism currently but we did not have any specific threats to act upon.”

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“There was only one shot fired and the aggressor was apprehended and brought to hospital,” he said.

In a video purporting to show the aftermath of the attack, screams sound like “Allahu Akbar” - Arabic for “God is the greatest” - however many have argued on social media that the phrase sounds like “beware” in Finnish.

In June, Finland’s intelligence and security agency Supo raised the country’s terror threat level by a notch, from “low” to “elevated”, the second notch on a four-tier scale.

It said at the time it saw an increased risk of an attack committed by the the so-called Islamic State (IS) group.

The stabbing spree comes with Europe on high alert a day after drivers slammed vehicles into pedestrians in two attacks in Spain, killing at least 14 people and injuring more than 100 others.

In a separate attack in the German city of Wuppertal-Elberfeld, one man was stabbed to death and another injured.

Turku lies around 140 kilometres west of the capital, Helsinki.

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In Turku, images showed a body covered in a white blanket at the scene of the stabbing.

The attack took place in the heart of the port city in southwestern Finland, just after 3pm (10pm AEST) in a bustling neighbourhood.

“I saw an old woman, I tried to help her. She was bleeding all over her body,” Wali Hashi, who witnessed the attack, told AFP.

“She was wounded to her neck with the knife... I took her aside.”

Speaking to CNN, Kent Svensson, 44, said “people were running everywhere”.

“This guy had this huge knife in his hand - and several times he was stabbing this person,” he said. “This guy was just constantly stabbing. He was just turning around, flinging his knife everywhere. There were people lying everywhere.”

“We were just talking about what happened in Barcelona,” he said. “We thought we were safe in Finland. And then this happens.

Multiple people stabbed in #Turku shouting Allahu Akbar pic.twitter.com/2AQgrMJRox — Waltteri Varjokivi (@varjokivi) August 18, 2017

“The woman was on the ground. She was dead. It’s just awful,” he said.

“The government is closely following the events in Turku and the ongoing police operation. The government will meet later today,” tweeted Prime Minister Juha Sipila ahead of a cabinet meeting.

Witnesses said they saw a pool of blood following the attack.

South-West Finland police said on Twitter: “Several people stabbed in central Turku. People are requested to avoid the city centre.”

Finnish police are reinforcing security at Helsinki Airport and train stations following the Turku stabbings.