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Canadian companies don't trade a lot with the European Union, so many domestic investors ignore the continental economy. They should probably start paying attention.

A sharp deterioration in the euro zone economy represents a significant threat to global growth and, more specifically, to the commodity prices on which an outsized portion of domestic equity returns depend.

The European Union is only three per cent smaller than the $17-trillion U.S. economy and has a near-equal influence on global economic growth. Perhaps more importantly for the Canadian equity market, the EU's imports from China are almost exactly the same size as those of the United States, the world's largest economy.

The EU imports help drive China's economy and China, as the largest market for virtually every global commodity, has an outsized influence on global resource prices.

The relationship between Europe, China and commodity prices is apparent in the chart below. The year over year change in Chinese exports to Europe closely tracks the year over year change in the Bloomberg Commodity Total Return Index.

SOURCE: Scott Barlow/Bloomberg

Imports to the EU economy are clearly not the only factor driving commodity prices but, as the chart shows, the economies of the region are large enough to be a major factor. And right now, that doesn't look like a good thing.

The recent trend of weaker-than-forecast European economic data is all the more surprising because not much was expected in the first place. When the year began, the consensus GDP growth guesstimate for 2014 was a meagre 1 per cent.

Still, the Citi Economic Surprise Index for the region – a weighted measure comparing economic data to economists' expectations – has fallen 65 points since late January, and is now mired deep in negative territory at -35. (A measure of zero indicates economic reports coming in as expected). European economies can't even meet depressed growth expectations.

Domestic investors should remain aware that the combined euro zone economies are both very big and, relative to the emerging economies, very rich. A continued slowdown in the Europe forms a distinct risk to global growth and by extension, commodity prices.

Follow Scott Barlow on Twitter @SBarlow_ROB.