There's a significant pause on Raiden's end. He assumes, initially, that she's talking about the monster, and he looks down at it curiously as he withdraws his sword. For a brief moment he does actually question if it's real and if he's not in some training simulation, but then he realises that's not where Milly's attention was when she asked the question.

"Your... Hand?" If he looks confused, it's only because he is. He's pegged the expression on her face as confusion? Maybe? But he can't figure out why someone would be confused about having a gun in their hand. It seems like the kind of thing you'd know about.

(Considering the last few years of his life, that conclusion is laughable at best.)