(Reuters) - Hedge funds are cranking up their bets in equities and credit in 2012's buoyant markets in the belief that the euro zone, U.S. and Chinese economies will fare better than many were fearing last year. 

Many funds think the European Central Bank's long-term refinancing operations (LTRO), which flooded markets with 489 billion euros ($644 billion) of cheap cash in December and provide more this month, are a turning point in propping up the region's battered banks.

 

They are also betting that China, which is facing a fifth successive quarter of slowing economic growth, will experience a so-called 'soft landing', while the U.S., which saw its fastest growth in one-and-a-half years in the fourth quarter, is firmly on the recovery path.