JEF - Jefferies Financial upgraded to Outperform at KBW on investment banking recovery

Keefe, Bruyette & Woods analyst Michael Brown has upgraded Jefferies Financial Group ( NYSE: JEF ) Tuesday to Outperform from Market Perform as a play on the potential recovery in investment banking.

"While the macro landscape remains challenged, an expectation for an inflection from the trough in investment banking is a key driver of our upgrade, as a modest improvement should push EPS estimates and shares higher into year-end," Brown wrote in a note to clients.

Other positive catalysts include Jefferies' ( JEF ) simplification through non-core asset exits and its Investor Day in October.

Brown expects M& activity to pick up as the European Capital Markets drought is now eight months old, but the initial public offering market, within European Capital Markets, could stay quiet until 2023.

Jefferies ( JEF ) stock has risen 0.9% in Tuesday morning trading against a sea of red in the financials.

The KBW upgrade on Jefferies ( JEF ) comes on the same day that Odeon Capital's Dick Bove downgraded Goldman Sachs ( GS ) and Morgan Stanley ( MS ) to Sell and Citigroup ( C ) to Hold as he sees dark times ahead for investment banking as the Federal Reserve continues to tighten policy.

The Buy rating on Jefferies ( JEF ) contrasts with the SA Quant rating of Hold and aligns with the average Wall Street rating of Buy.

Last week Bloomberg reported that Jefferies ( JEF ) is poised to sell its stake in Oak Hill Capital to Kuwait's Wafra

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