* FTSEurofirst 300 down 0.2 pct, Euro STOXX 50 down 0.3 pct
* Adidas falls 5.7 percent after profit warning
* Choppy trade expected as derivative contracts expire
* Price-to-earnings ratio hits near four-year high
By Blaise Robinson
PARIS, Sept 20 (Reuters) - European shares dipped in early trade on Friday, retreating from five-year highs as the initial enthusiasm sparked by the U.S. Federal Reserve's decision to postpone the withdrawal of monetary stimulus faded.
Shares in Adidas were among the biggest losers across Europe, dropping 5.7 percent after the German sports apparel maker warned on its 2013 profit outlook.
Germany's No. 2 utility RWE AG also fell 1.9 percent after it slashed its dividend.
The session was expected to be volatile as September derivatives contracts were set to expire, with investors expected to have little appetite to roll over positions into October and November contracts.
"Investors are now worrying about the lack of potential positive catalysts going forward," said Guillaume Dumans, co-head of research firm 2Bremans. "If you add to that today's 'quadruple witching' derivative contract expiry, there's quite a bit of tension."
At 0727 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was down 0.2 percent at 1,263.48 points after hitting its highest level since mid-2008 in the previous session. It was on track for a third straight week of gains.
The euro zone's blue-chip Euro STOXX 50 index was down 0.3 percent at 2,927.13 points.
The Fed's quantitative easing programme has been a major factor behind the global equity market rally of the past year, which has propelled European shares to valuations versus future earnings not seen in nearly four years. That suggests markets' move higher is more about the excess capital in the financial sector than underlying company performance.
The STOXX Europe 600 index trades at 13 times 12-month forward earnings, a level not seen since November 2009, according to Thomson Reuters Datastream. The index also trades at 1.69 times book value, the highest price-to-book ratio since early 2011.
Analysts said investors' focus would shift to U.S. budget negotiations, which have the potential to keep markets choppy. Washington faces twin deadlines, with a budget deal needed by Sept. 30 to avoid a federal government shutdown and a separate agreement necessary by mid-October to prevent the United States from defaulting on its national debt.
"The inability to accomplish either of these would bring government spending (in) areas such as defence and healthcare to a standstill, whilst the debt limit alone has the potential to push the U.S. treasury into default considering the ongoing fiscal obligations," Joshua Mahony, analyst at Alpari, said.