[ reaches for the handkerchief. that small nod means thank you, he's just not very good at verbalising it just yet? he is absolutely going to use the handkerchief to wipe away the blood on his arm though. ]

Horses of wood coming alive is a fine work of magic, but... [ dramatic pause as he points accusingly at Eddie's horse that's just. standing there, probably. ] If you let them take you off the path they will come alive and stab YOU...

[ that explains the blood at least. ]