European stock markets are set to edge higher Thursday as the region continues to reopen for business, but gains will be limited amid rising tensions between the U.S. and China over Hong Kong.

At 2 AM ET (0600 GMT), the DAX futures contract in Germany traded 0.5% higher. France's CAC 40 futures were up 1%, while the FTSE 100 futures contract in the U.K. rose 1.2%. 

Countries throughout Europe are restarting their economies, with the United Kingdom, now the country with the most confirmed Covid-related deaths in the region, set to loosen its lockdown in June.

Furthermore, policymakers continued to take steps to aid the economy. The EU Commission announced its plan on a European recovery fund Wednesday, offering up 250 billion euros in loans on top of the 500 billion in grants suggested by France and Germany last week. 

However, a particular risk to investor confidence is the stretched relationship between China and the U.S., after China’s proposed national security laws for Hong Kong and Macau. 

U.S. Secretary of State Mike Pompeo added to the tension overnight by stating that Hong Kong's autonomy had been undermined so fundamentally that the territory no longer warranted special treatment, a potentially big blow to the city's status as a financial hub.

"The overall tone is in support of risk-on trades, and we can see less short-selling and more willingness to test the upside in equities," said Yukio Ishizuki, strategist at Daiwa Securities in Tokyo.

"There remains a fair amount of concern about Hong Kong, but for now markets look like they will remain calm."

In corporate news, British Land (LON:BLND) will be in focus after the shopping center owner slashed the value of its property portfolio, citing the impact of the coronavirus.

Oil prices headed lower Thursday, weighed on by a surprise addition to crude stocks, according to API data late Wednesday, of 8.7 million barrels last week, compared with analysts' expectations for a draw of 1.9 million barrels.

The market will be looking to see if the U.S. Energy Information Administration’s release later Thursday confirms this figure.

At 2 AM ET, U.S. crude futures traded 3.3% lower at $31.73 a barrel. The international benchmark Brent contract fell 2% to $34.05.

Elsewhere, gold futures rose 0.5% to $1,718.50/oz, while EUR/USD traded at 1.1012, up 0.1% on the day.