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Cigarette stocks slump, earnings see FTSE 100 mark worst week in a month

* FTSE 100 down 1 pct at close

* Tobacco stocks hit by U.S. FDA nicotine statement

* BT drops after Italian scandal dents profits

* AstraZeneca shares recover slightly (Recasts, adds quote and detail, updates prices at close)

LONDON, July 28 (Reuters) - Britain's major share index posted its first weekly loss since June on Friday after a late-session slump in tobacco stocks, falls among banking stocks and a disappointing update from telecoms firm BT.

The FTSE 100 ended the session 1 percent lower at 7,368.37 points, in line with a broader decline in the European market.

Shares in British American Tobacco sank as much as 13.7 percent, though recovered to end 6.8 percent lower, after the U.S. Food and Drug Administration said it aimed to cut nicotine in cigarettes to non-addictive levels.

Shares in BAT's peer Imperial Brands also dropped nearly 4 percent, its worst day since November 2016.

"There's a knee-jerk reaction to the possibility of the United States becoming a nicotine addiction-free country," said Jonathan Roy, advisory investment manager at Charles Hanover Investments, adding that it could be an issue for cigarette companies in the long-term.

"This comment today is likely to put little bit more emphasis on (UK tobacco firms') diversification going forward."

Elsewhere results were in focus, with telecoms operator BT down 1.8 percent after its first quarter profit was dented by settlements for an Italian accounting scandal, with government regulation also a concern for investors.

"There's a lot going on in terms of regulatory review. The multi-million dollar question is how much will BT have to spend in capex on broadband investment in the UK, and what return will they be allowed to make from that," said Eric Moore, UK Equity Income fund manager at Miton Group.

After wild stock moves from pharmaceuticals companies AstraZeneca and Indivior on Thursday, trading was more muted, although Astra's dramatic 15 percent drop helped put blue-chips on track for a weekly fall.

Among financials, which took around 19 points off the index, Barclays shares see-sawed before ending 1.7 percent lower after the bank reported a 1.2 billion pound first-half loss following a 2.5 billion pound hit from the sale of its Africa business.

Mid-caps were also weak, down 0.8 percent. Valve maker Rotork dropped 7.5 percent after the company said CEO Peter France was resigning.

Investors were looking ahead to next week's results which would help paint a picture of the health of the UK economy, with HSBC and the major listed supermarkets due to report.

"There's parts of the market that investors are more worried about, like retailers and consumer stocks, that haven't reported yet," Miton's Moore said.

"UK consumer confidence data today was pretty horrid," he said, in reference to a survey on Friday showing British consumer morale has sunk back to depths hit just after last year's Brexit vote. (Reporting by Helen Reid & Kit Rees; Editing by Gareth Jones)